Case: Surjit Lal Chhabda Vs. Commissioner Of Income Tax, Bombay

and even for some purposes of legal theory, ancestral property may perhaps be described, and usefully described, as family property; but it does not follow that in the eye of the Hindu law it belongs save in certain circumstances, to the family as distinct from the individual. By reason of its origin a mans property may be liable to be divested wholly or in part on the happening of a particular event, or may be answerable for particular obligations, or may pass at his death in a particular way; but if, in spite of all such facts, his personal law regards him as the owner, the property as his property and the income there from as his income, it is chargeable to income-tax as his, i.e., as the income of an individual. In their Lordships view it would not be in consonance with ordinary notions or with a correct interpretation of the law of the Mitakshara, to hold that property which a man has obtained from his father belongs to a Hindu undivided family by reason of having a wife and daughters."31. On the other hand, in Arunachalams case which falls within the rule in Gowli Buddannas case, the Privy Council observed:"But though it may be correct to speak of him (the sole surviving coparcener) as the owner, yet it is still correct to describe that which he owns as the joint family property. For his ownership is such that upon the adoption of a son it assumes a different quality: it is such too, that female members of the family (whose members may increase) have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it. And these are incidents which arise, notwithstanding his so-called ownership, just because the property has been and has not ceased to be joint family property.... it would not appear reasonable to impart to the legislature the intention to discriminate, so long as the family itself subsists, between property in the hands of a single coparcener and that in the hands of two or more coparceners."Holding that it was an irrelevant consideration that a single coparcener could alienate the property in a manner not open to one of several coparceners, the Privy Council said:"Let it b e assumed that his power of alienation is unassailable: that means no more than that he has in the circumstances the power to alienate joint family property. That is what it is until he alienates it, and, if he does not alienate it, that is what it remains. The fatal flaw in the argument of the appellant appeared to be that, having labeled the surviving coparcener owner, he then attributed to his ownership such a congeries of rights that the property could no longer be called joint family property. The family, a body fluctuating in numbers and comprised of male and female members, may equally well be said to be owners of the property, but owners whose ownership is qualified by the powers of the coparceners. There is in fact nothing to be gained by the use of the word owner in this connection. It is only by analysing the nature of the rights of the members of the undivided family, both those in being and those yet to be born, that it can be determined whether the family property can properly be described as joint property of the undivided family."32. These two sets of tests, both evolved by the Privy Council govern two distinct sets of cases and there is no inconsistency between the two tests. The test evolved in Kalyanjis case, not in Arunachalams or Gowli Buddannas case, has to be applied to the instant case.33. Kathoke Lodge was not an asset of a pre-existing joint family of which the appellant was a member. It became an item of joint family property for the first time when the appellant threw what was his separate property into the family hotchpot. The appellant h as no son. His wife and unmarried daughter were entitled to be maintained by him from out of the income of Kathoke Lodge while it was his separate property. Their rights in that property are not enlarged for the reason that the property w as thrown into the family hotchpot. Not being coparceners of the appellant, they have neither a right by birth in the property nor the right to demand its partition nor indeed the right to restrain the appellant from alienating the property for a ny purpose whatsoever. Their prior right to be maintained out of the income of Kathoke Lodge remains what it was even after the property was thrown into the family hotchpot: the right of maintenance, neither more nor less. Thus, Kathoke Lodge may be usefully described as the property of the family after it was thrown into the common stock but it does not follow that in the eye of Hindu Law it belongs to the family, as it would have, if the property were to devolve on the appellant as a so le surviving coparcener.The property which the appellant has put into the common stock may change its legal incidents on the birth of a son but until that event happens the property, in the eye of Hindu Law, is really his. He can deal with it as a full owner, unrestrained by considerations of legal necessity or benefit of the estate. He may sell it, mortgage it or make a gift of it. Even a son born or adopted after the alienation shall have to take the family hotchpot as he finds it. A son born, begotten or adopted after the alienation has no right to challenge the alienation.34. Since the personal law of the appellant regards him as the owner of Kathoke Lodge and the income there from as his income even after the property was thrown into the family hotchpot, the income would be chargeable to income-tax as his individual income and not that of the family.35.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The appellant is governed by the Mitakshara school of Hindu law but that is not of any particular consequence for the purposes of thisis true that the appellant cannot constitute a coparcenary with his wife and unmarried daughter but under the Income-tax Act a Hindu undivided family, not a coparcenary, is a taxable unit. A Hindu coparcenary is a much narrower body than the joint family. It includes only those persons who acquire by birth an interest in the joint or coparcenary property and these are the sons, grandsons and great-grandsons of the holder of the joint property for the time being, that is to say, the three generations next to the holder in unbroken male descent. Since under the Mitakshara Law, the right to joint family property by birth is vested i n the male issue only, females who come in only as heirs to obstructed heritage (sapratibandha days), cannot bethe contention of the Department that in the absence of a pre-existing joint family the appellant cannot constitute a Hindu undivided family with his wife and unmarried daughter must fail. The view of the High Court that the appellant h as "no son and therefore no undivided family" is plainly unsound and must also be rejected. Accordingly, the question whether the income of the Kathoke Lodge can be assessed in the hands of the appellant as a Karta or manager of the joint family must be decided on the basis that the appellant, his wife and unmarried daughter are members of a Hindu undividedapart from the merits of the point we ruled that the contention was not open to the Department. The statement of case framed by the Tribunal shows that such a contention was not raised before thewas not a concession on a question of law in the sense as to what the true legal position was. What the Departments counsel stated in the High Court was that he did not want to press the particular point. In our opinion, it is not open to the Department to take before us a contention which in the first place does not arise out of the reference and which the Departments counsel in the High Court raised but did not press.Having examined the true nature of an undivided family under the Hindu law and in view of the findings of the Tribunal and the High Court on the second aspect, two points emerge clear: Firstly that the appellant constituted a Hindu undivided family with his wife and unmarried daughter and secondly that Kathoke Lodge which was the appellants separate property was thrown by him in the familycontrasted with the cases of these four partners, Kathoke Lodge which was once the separate property of the appellant was thrown by him in the common stock, which raises the question whether that circumstance is sufficient to justify the assessment of the income from that property in the appellants status as the manager of the joint family. On this point the cases of Kanji and Sewdas furnish a near parallel. They did not have to throw their interest in the firm in the common stock because that interest was, on assumption, their ancestral property. But even though the property was ancestral, the income which they received from it was treated as their separate property as neither of them had a son who could take interest in the ancestral property by birth. Applying that analogy, even if Kathoke Lodge were to be an ancestral ass et, its income would still have to be treated as the appellants separate property as he has no son who could take interest in that property by birth. On this reasoning, the effect of the appellant throwing Kathoke Lodge into the family hotchpot could not be more telling than if that property was his ancestrale appellants counsel is thus right in his submission that the observations made by the Privy Council in Kalyanjis case as regards the correctness of the Bombay view in Lakshminarayans case is not good law. I n fact, the decision of the Privy Council in appeal from the judgment of the Bombay High Court in Lakshminarayans case has itself been disapproved by this Court. But that does not affect the correctness of the Privy Council decision in Kalyanjis case itself as regards the nature of the income received by the six partners from the firm. That part of the judgment in Kalyanjis case has never been doubted and is open to no exception. For the matter of that, the error of the Privy Councils decision in Lakshminarayans case consisted in overlooking the factual distinction between that case and Kalyanjis case, as a result of which the ratio of Kalyanjis case came to be wrongly applied to Lakshminarayansratio of Kalyanjis case would therefore apply to the instant case, the parallel being furnished by the cases of Kanji anddecision of the Privy Council in Attorney General of Ceylon v. A. R. Arunachalam Chettiar and Others(1), the decisions of this Court in the cases of Gowli Buddanna and Narendranath and the decision of the Bombay High Court in Lakshminarayans case fall within that class and are not to be confused with cases like the one on hand, which fall within the rule in Kalyanjisthis class of cases, the composition of the family is a matter of great relevance for, though a joint Hindu family may consist of a man, his wife and daughter, the mere existence of a wife and daughter will not justify the assessment of income from the joint family property in the status of the head as a manager of the joint family. The appellants case falls within the rule in Kalyanjis case since the property, before it came into his hands, was not impressed with the character of joint family property. It is of great relevance that he has no son and his joint family consists, for the time being, of himself, his wife andit is realised that there are two distinct classes of cases which require a different approach, there would be no difficulty in understanding the implications of the apparently conflicting tests evolved as guides for deciding the two classes ofLodge was not an asset of a pre-existing joint family of which the appellant was a member. It became an item of joint family property for the first time when the appellant threw what was his separate property into the family hotchpot. The appellant h as no son. His wife and unmarried daughter were entitled to be maintained by him from out of the income of Kathoke Lodge while it was his separate property. Their rights in that property are not enlarged for the reason that the property w as thrown into the family hotchpot. Not being coparceners of the appellant, they have neither a right by birth in the property nor the right to demand its partition nor indeed the right to restrain the appellant from alienating the property for a ny purpose whatsoever. Their prior right to be maintained out of the income of Kathoke Lodge remains what it was even after the property was thrown into the family hotchpot: the right of maintenance, neither more nor less. Thus, Kathoke Lodge may be usefully described as the property of the family after it was thrown into the common stock but it does not follow that in the eye of Hindu Law it belongs to the family, as it would have, if the property were to devolve on the appellant as a so le surviving coparcener.The property which the appellant has put into the common stock may change its legal incidents on the birth of a son but until that event happens the property, in the eye of Hindu Law, is really his. He can deal with it as a full owner, unrestrained by considerations of legal necessity or benefit of the estate. He may sell it, mortgage it or make a gift of it. Even a son born or adopted after the alienation shall have to take the family hotchpot as he finds it. A son born, begotten or adopted after the alienation has no right to challenge thethe personal law of the appellant regards him as the owner of Kathoke Lodge and the income there from as his income even after the property was thrown into the family hotchpot, the income would be chargeable to income-tax as his individual income and not that of the family.