JUDGMENT
M.B. Sharma, J.
1. The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, on an application made to it under Section 256(2) of the Income-tax Act, 1961 (for short, “the Act”), by the Commissioner of Income-tax, Jaipur, has drawn up a statement of case and referred the following question of law for the opinion of this court :
“Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the separate property of the deceased, Shri L.K. Agarwal (sic) would constitute Hindu undivided family property in the hands of his sons and grandsons ?”
2. For the assessment year 1977-78, the assessee, Shri L.K. Goyal, filed a voluntary return declaring a total income of Rs. 15,510 in the status of a Hindu undivided family. The assessee died on February 25, 1976 (sic), leaving behind four sons, namely, S.S. Goyal, V.P. Goyal, H.C. Goyal and M.C. Goyal. The property owned by the family represented deposits with Messrs. Jaipur Auction House, Messrs. Modern Furniture and Messrs. Goyal
and Sons, and the return for the assessment year 1977-78, has been filed by the assessee in respect of the income earned on the above deposits. The Income-tax Officer, in his assessment order dated February 7, 1980, made the assessment on protective basis in the status of a Hindu undivided family as the return was filed in the status of a Hindu undivided family. The Income-tax Officer said that the deceased has always been assessed in his individual capacity and, at no point of time, the question of Hindu undivided family status was raised. He also reached the conclusion that as the deposits were not divided among the legal heirs, the correct status would be that of an association of persons. The assessee filed an appeal against the aforesaid order before the Appellate Assistant Commissioner of Income-tax who, following the decision in the case of M.N. Jain v. ITO I. T. A. No. 125/JP of 1979, decided on November 26, 1980, held that, on the death of Shri L.K. Goyal, the estate devolved upon his four sons by way of inheritance in the capacity of a Hindu undivided family and, therefore, the Income-tax Officer was not right in holding that the correct status of the dependants was that of an association of persons. It was held that the correct status of the assessee should be taken as that of a Hindu undivided family. The Commissioner of Income-tax, Jaipur, filed second appeal to the Income-tax Appellate Tribunal, Jaipur Bench, and the Tribunal upheld the order of the Appellate Assistant Commissioner of Income-tax and dismissed the appeal. An application was filed under Section 256(1) of the Act before the Tribunal to refer the aforesaid question for the opinion of this court. It will be seen that the case of M.N. Jain, which was relied upon by the learned Appellate Assistant Commissioner of Income-tax in taking the view that, on the death of L. K. Goyal, his estate devolved upon his four sons by way of inheritance, was decided on the basis of CIT v. Dr. Babubhai Mansukhbhai [1977] 108 ITR 417 (Guj).
3. The contention of learned counsel for the Revenue is that L.K. Goyal had throughout been assessed as an individual and on his death the income for which the return has been filed, it would have gone by inheritance to his four sons and they did not constitute a Hindu undivided family and the status could not be held as Hindu undivided family. According to learned counsel, the Income-tax Officer has rightly assessed him on protective basis but in fact the status of the dependants is that of an association of persons. Learned counsel contends that there are two authorities in which the aforesaid view is taken and in this connection, reference was made to Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523 (Mad) [FB] and CIT v. Ram Rakshpal, Ashok Kumar [1968] 67 ITR 164 (All). Learned counsel for the assessee, on the other hand, contended that even if two views are
plausible and possible, the view more favourable to the assessee should be followed.
4. An attempt has been made by learned counsel for the assessee during the course of arguments as well as by written objections to this reference by the Tribunal to show to this court that in fact so far as three deposits in the above three firms are concerned, their nature was of Hindu undivided family and though L.K. Goyal was assessed as an individual, he had also Hindu undivided family property and the deposits in the said three firms were sale proceeds of immovable properties, but we are required to answer the question referred to us and will not go into the correctness or otherwise of the facts as submitted by learned counsel for the parties before us. We will assume for the disposal of this reference that L.K. Goyal was assessed as an individual and the question is as to whether, on his death, his individual estate which was the subject of assessment before the assessing authority had and could have the status of Hindu undivided family on substantive basis as held by the Appellate Assistant Commissioner or on protective basis as held by the assessing authority ? In the case of CIT v. Ram Rakshpal, Ashok Kumar [1968] 67 ITR 164, the Hon’ble judges of the Allahabad High Court referred to the case of Muhammad Husain Khan v. Babu Kishva Nandan Sahai, AIR 1937 PC 233, 238, wherein Sir Shadi Lal, an eminent judge, observed (at page 170) :
“The rule of Hindu law is well-settled that the property which a man inherits from any of his three immediate paternal ancestors, namely, his father, father’s father, and father’s father’s father is ancestral property as regards his male issue, and his son acquires jointly with him an interest in it by birth. Such property is held by him in coparcenary with his male issue, and the doctrine of survivorship applies to it.”
5. The learned judges said that, in view of the provisions of the Hindu Succession Act, individual assets left by a Hindu would be governed by Section 8 of the Hindu Succession Act and to that extent by virtue of Section 4(1)(a) of the Hindu Succession Act, the pre-existing rule of Hindu law will stand replaced. The Full Bench of the Madras High Court in the case of Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523 was considering a case of partition effected in the Hindu undivided family consisting of P, his wife, their son, K, and their daughter-in-law. P was allotted certain properties for his share and got separated. K, along with his wife and their subsequently born children constituted a Hindu undivided family which was being assessed in that status. P died on September 9, 1963, leaving behind his widow and divided son, K, who was the karta of his Hindu
undivided family as his legal heir. The Madras High Court held that under Section 8 of the Hindu Succession Act, 1956, these two persons succeeded to the properties left by the deceased, P, and divided the properties among themselves. As said earlier, K was the karta of the undivided family of himself, wife and subsequently born children and for certain years the Income-tax Officer included for assessment the income received from the properties inherited by K from his father, P. The said inclusion was confirmed by the Appellate Assistant Commissioner but, on further appeal, the Tribunal held that the properties did not form part of the joint family properties and hence the income therefrom could not be assessed in the hands of the family. On a reference to the Madras High Court, a Full Bench of that court held that (headnote) :
“. . . . the property of a male Hindu devolved on his death on his sons and grandsons as the grandsons also have an interest in the property. However, by reason of Section 8 of the Hindu Succession Act, 1956, the son’s son gets excluded and the son alone inherits the property to the exclusion of his son. No interest would accrue to the grandson of P in the property left by him on his death.”
6. The Full Bench further held (headnote) :
“As the effect of Section 8 is directly derogatory of the law established according to Hindu law, the statutory provision must prevail in view of the unequivocal intention in the statute itself, expressed in Section 4(1), which says that to the extent to which provisions have been made in the Act, those provisions shall override the established provisions in the texts of Hindu law.”
7. It will be seen that the aforesaid view is in consonance with the view of the Allahabad High Court in the case of CIT v. Ram Rakshpal, Ashok Kumar [1968] 67 ITR 164. Similarly, the Madhya Pradesh High Court also examined this aspect of the case in the case of Shrivallabhdas Modani v. CIT [1982] 138 ITR 673 ; [1983] Tax LR 559, and held that if there was no coparcenary subsisting between a Hindu and his sons at the time of death of his father, property received by him on his father’s death could not be so blended with the property which had been allotted to his sons on a partition effected prior to the death of the father. The court also referred to the provisions of Section 8 of the Hindu Succession Act and felt that Section 8 of the Hindu Succession Act should be taken as a self-contained provision laying down the scheme of devolution of the property of a Hindu dying intestate. Therefore, the property devolving on a Hindu on the death of his father intestate after the coming into force of the
Hindu Succession Act did not constitute Hindu undivided family property consisting of his own branch including his sons. In fact the Madhya Pradesh High Court followed the Full Bench decision of the Madras High Court in the case of Addl. CIT v. P.L. Karuppan Chettiar [1978] 114 ITR 523. The Andhra Pradesh High Court also had occasion to deal with a similar question, though in the context of wealth-tax in the case of CWT v. Mukundgirji [1983] 144 ITR 18 and in view of Section 8 of the Hindu Succession Act said that the property which a son inherited from his father in case the father and his son do not constitute a joint Hindu family in the coparcenary is his individual property.
8. There is only one case where a contrary view has been taken and it is CIT v. Dr. Babubhai Mansukhbhai [1977] 108 ITR 417 (Guj). Placing reliance on the old Hindu law, the Gujarat High Court held that in the case of Hindus governed by the Mitakshara law, where a son inherits the self-acquired property of his father, the son takes it as the joint family property of himself and his son and not as his separate property. The correct status for the assessment to income-tax of the son in respect of such property is as representing his Hindu undivided family. It did not agree with the view of the Allahabad High Court expressed in the case of CIT v. Ram Rakshpal, Ashok Kumar [1968] 67 ITR 164. It will be seen in this case that the Appellate Assistant Commissioner decided the appeal under its order dated March 19, 1981 (annexure “B”), on the basis of the Gujarat High Court ruling in the case of CIT v. Dr. Babubhai Mansukhbhai [1977] 108 ITR 417. It will be further seen from the order of the Tribunal dated March 24, 1982, that the Tribunal dismissed the appeal relying on its earlier decision in the case of M.N. Jain and the aforesaid case of the Gujarat High Court. The above case of the Gujarat High Court and the other cases of the Allahabad High Court, Andhra Pradesh, Madhya Pradesh and Madras High Courts were considered by the apex court in the case of CWT v. V. Chander Sen [1986] 161 ITR 370 ; AIR 1986 SC 1753, and the Supreme Court held that the view taken in the aforesaid case of the Gujarat High Court (CIT v. Dr. Babubhai Mansukhbhai [1977] 108 ITR 417), is not the correct view and the apex court upheld the view taken by other High Courts referred to above. The apex court, in paragraph 20 (at page 1760 of AIR) of the aforesaid judgment said (at page 381 of 108 ITR) :
“In view of the preamble to the Act, i.e., to modify where necessary and to codify the law, in our opinion, it is not possible when the Schedule indicates heirs in Class I and only includes son and does not include son’s son but does include son of a predeceased son, to say that
when a son inherits the property in the situation contemplated by Section 8, he takes it as karta of his own undivided family. The Gujarat High Court’s view, noted above, if accepted, would mean that though the son of a predeceased son and not the son of a son who is intended to be excluded under Section 8 is to inherit, the latter would, by applying the old Hindu law, get a right by birth to the said property contrary to the scheme outlined in Section 8. Furthermore, as noted by the Andhra Pradesh High Court, the Act makes it clear by Section 4 that one should look to the Act in case of doubt and not to the pre-existing Hindu law. It would be difficult to hold today that property which devolved on a Hindu under Section 8 of the Hindu. Succession Act would be Hindu undivided family property in his hands, vis-a-vis, his own son ; that would amount to creating two classes among the heirs mentioned in Class I, the male heirs in whose hands it will be joint Hindu family property, vis-a-vis, sons and female heirs with respect to whom no such concept could be applied or contemplated. It may be mentioned that heirs in Class I of the Schedule under Section 8 of the Act included widow, mother, daughter of a predeceased son, etc.”
8. It can, therefore, be said that the view taken by the Tribunal is not correct. We, therefore, answer the question referred to us as under :
“On the facts and in the circumstances of the case, the Tribunal was not justified in holding that the separate property of the deceased Shri L.K. Goyal would constitute Hindu undivided family property in the hands of his sons and grandsons.”
9. We hereby direct that a copy of this judgment be sent under the seal of the court and under the signature of the Registrar to the Tribunal who shall pass necessary orders in conformity with this judgment. Costs made easy.
