Andhra Pradesh H.C : HUF properties were attached for realization of tax due by firm

High Court Of Andhra Pradesh

ITO Vs. Tippala China Appa Rao

Assessment Year : 1971-72 and 1972-73

Section : 220,4

P.S. Narayana, J.

Appeal Suit No. 1410 Of 1988

June  18, 2010 

JUDGMENT

1. This appeal is filed as against the decree and judgment made in O.S. No. 163/81 on the file of learned Principal Subordinate Judge, Visakhapatnam whereby the suit filed by the Income-tax Officer, Visakhapatnam – the appellant herein/plaintiff, was dismissed. The said suit was filed to set aside the claim order made by the Tax Recovery Officer in O.P. No. 136/79-80 dated 29-4-1980. The learned Principal Subordinate Judge, Visakhapatnam in the light of the respective pleadings of the parties, having settled the issues, ultimately came to the conclusion that the order under challenge does not suffer from any illegality and accordingly the suit was dismissed directing the parties to bear their own costs. Aggrieved by the same, the present appeal had been preferred.

2. The learned standing counsel representing the appellant had taken this court through the respective pleadings of the parties and the evidence available on record in proper perspective. The learned standing counsel also would maintain that in the facts and circumstances of the case, inasmuch as the fifth respondent was a partner representing the joint family as such, the respondent Nos. 1 to 4 being the sons of the fifth respondent are liable under the theory of pious obligation. The learned standing counsel had strongly relied upon the decisions in CIT v. Piara Singh [1980] 124 ITR 40/3 Taxman 67 (SC) and J. Devaraja Rao v. ITO AIR 1970 AP 426 [FB] and made elaborate submissions on the aspect of the applicability of the doctrine of pious obligation and also on the aspect of the illegality of the contract as such hence the findings are to be set aside and the appeal to be allowed.

3. Per contra, the learned counsel representing the respondents had taken this court through the findings recorded by the learned Principal Subordinate Judge, Visakhapatnam and would be that in the light of the convincing findings recorded by the trial court, this is not a fit matter to be interfered with and the appeal to be dismissed.

4. Heard the counsel on record.

5. Before taking up further discussion on the points for consideration which would arise in this appeal, it may be appropriate to have a glance at the respective pleadings of the parties, the evidence available on record and the findings recorded by the trial court in a nutshell.

6. The parties hereinafter would be referred to as “plaintiff” and “defendants” as shown in O.S. No. 163/81 aforesaid.

Pleadings of the parties

Averments made in the plaint

7. It was pleaded that the fifth defendant is the father of defendant Nos. 1 to 4 and he is the karta and father-manager of the joint family consisting of himself and his sons—defendant Nos. 1 to 4, his wife Tippala Veerayamma and his two daughters. The fifth defendant had inherited from his father considerable properties, movable and immovable including 12 acres of agricultural land, a house at Venkannapalem and considerable cash, all having fallen to his share in the partition with his brothers. Besides the above mentioned ancestral properties, the fifth defendant, as karta of the Hindu joint family further made certain acquisitions, including the suit schedule properties with the aid of the joint family nucleus and from the income of the joint family properties and its assets. Besides the joint family properties acquired and the ancestral properties referred to above he had no personal properties and he never possessed any movable or immovable properties in his personal capacity. Apart from the above mentioned properties, the family was running arrack business since 1963-64 onwards. The fifth defendant was also not employed and was only managing the arrack business of the Hindu undivided family as its karta and had been maintaining himself and his family from out of the income of the joint family properties which he is managing as the karta and the father-manager of the Hindu joint family consisting of himself and his family. While so, in the year 1971 in his capacity as a joint family manager it had entered into a partnership with 18 others known as M/s. Visakha Gowda Association which carried on the business in abkari contracts by investing in joint family funds. The firm M/s. Visakha Gowda Association, now a dissolved firm, initially filed a return on 28-8-1971, disclosing a loss of Rs. 12,185 for the assessment year 1971-72. A revised return of income was filed by the said firm on 26-11-1971 finally disclosing an income of Rs. 88,890. Similarly a return was filed on 19-12-1972 for 1972-73 disclosing an income of Rs. 72,903 which was further revised under a return dated 26-3-1975, disclosing an income of Rs. 73,403. The assessments for the said years could only be completed by the plaintiff on 28-2-1976, on account of the delaying tactics adopted and on account of the failure of the production of the accounts and required date by the said firm in proper time for the assessment years 1971-72 and 1972-73. Finally the firm was assessed to a total amount of Rs. 12,61,921 as tax and penalties for the said two assessment years. The properties belonging to the joint family of the fifth defendant and his sons, namely the plaint schedule houses along with their appurtenant sites, the other properties belonging to the joint family were got attached by the plaintiff for realization of the tax arrears of M/s. Visakha Gowda Association of which the fifth defendant was a partner in the capacity as karta or manager of the joint family of himself and his sons. Defendant Nos. 1 to 4 who are the undivided sons of the fifth defendant objected to the attachment of the plaint schedule properties by filing O.P. No. 136/79-80 on 3-3-1980, before the Tax Recovery Officer by setting up the right of their mother and their two sisters to the plaint schedule houses on the ground that they were set apart for the security of their mother and for marriage purposes of their sisters. They further contended that the arrack business of M/s. Visakha Gowda Association had nothing to do with the joint family and that is purely individual business of their father, the fifth defendant and that only one-fifth undivided share of the fifth defendant in the joint family properties alone is liable to attachment in any event. The Tax Recovery Officer, while correctly rejecting the contention of the defendants that the house properties were set apart for the security of their mother and sisters as untenable had erroneously allowed the claim of the defendant Nos. 1 to 4 to the extent of their four-fifth share on the ground that the fifth defendant had entered into the arrack business as a partner of M/s. Visakha Gowda Association in his individual capacity and that the joint family has got no connection whatsoever in the said business and raised the attachment of the suit schedule properties to the extent of four-fifth undivided share of the defendant Nos. 1 to 4 ; that the arrack business run by the fifth defendant was the joint family business of the defendants and the investment for the said business had flown from the Hindu undivided family funds and as such the finding of the Tax Recovery Officer that the fifth defendant had joined into partnership in his individual capacity and not in the representative capacity as karta of the joint family is not correct and is contrary to the established facts and the various admissions made by the defendant Nos. 1 to 4 to the effect that the Hindu undivided family funds were invested by the fifth defendant for the said business. The fifth defendant representing the joint family as its karta, entered into a partnership business by investing the Hindu undivided family funds and carried the business on behalf of the family and as such the entire family properties are liable to be proceeded against including the share of the defendant Nos. 1 to 4. In any event, the fifth defendant being the father-manager, the debts contracted by him and his liabilities to the plaintiff towards tax dues are to be discharged by the defendant Nos. 1 to 4 under law and the said liability is not an outcome of an illegal or immoral debt or transaction. In that view of the pious obligation theory recognized under the Hindu law also the share of defendant Nos. 1 to 4 in the joint family property is liable to be proceeded against for the recovery of the monies recoverable from the father-manager-fifth defendant and as such the orders of the Tax Recovery Officer passed in O.P. No. 136/79-80 dated 29-4-1980, are not proper and valid and are liable to be set aside and hence the suit.

Averments made in the written statement filed by defendant Nos. 1 to 4

8. It was pleaded that the first defendant is already carrying on his separate business and the other defendants are still in college and school. Whatever investment was made by their father in the arrack business was his share in the family income and therefore the investment in arrack business is his exclusive investment and it cannot be said that the arrack business is the joint family business of the defendants. While carrying on the said business, the fifth defendant never purported to do so as manager of the joint family and merely because these defendants and the fifth defendant lived together and the household expenses were being met by the fifth defendant, it does not mean that the arrack business is the joint family business. The fifth defendant never entered in his capacity as joint family manager into a partnership with M/s. Visakha Gowda Association. The joint family funds were not invested in the said partnership business to which the fifth defendant was one of the partners. It is only in his capacity as individual that the fifth defendant contributed his separate share from the family income and it was not the joint family funds that were invested. The fifth defendant was partnership in his individual capacity in the said M/s. Visakha Gowda Association. Neither in the partnership deed nor in any document relating to the firm of M/s. Visakha Gowda Association the fifth defendant ever signed or purported to have signed as joint family manager to the best of the information of the defendants. The Tax Recovery Officer had rightly excluded the four-fifth share of the defendant Nos. 1 to 4 by holding that the same is not liable for attachment and sale holding that the arrack business carried on in partnership was the individual business of the fifth defendant and that as a partnership of the said firm he was not acting on behalf of the joint family. Items 4 and 5 being ancestral properties these defendants have four-fifth interest in the same. So far as the sites owned on which buildings covered by items 2 and 3 are constructed are concerned, they belong to the mother of the defendant Nos. 1 to 4. In so far as item-1 is concerned, one half of the building site belongs to their mother and the other half belongs to the joint family and there is no question of any debt here and there and there is no obligation on these defendants to meet the tax liability of their father more so when his one-fifth share is the property available for being proceeded against. No liability whatsoever attaches to these defendants and the theory of pious obligation never be invoked in a case of this nature. The orders passed by the Tax Recovery Officer in O.P. No. 136/79-80 does not call for any interference and hence the suit may be dismissed.

Averments made in the written statement filed by the fifth defendant

9. The fifth defendant denied the material allegations in the plaint and had taken a similar stand as that of defendant Nos. 1 to 4 in their written statement. Further it was pleaded that besides being an illiterate person he used to contribute his signature whenever and whoever asked him to sign. He never joined as a partner in the arrack business of M/s. Visakha Gowda Association in the capacity as a joint family manager and karta and that he had joined as a partner in the said firm in his individual capacity. He had never invested the joint family funds in the said business and only his share of income was invested in the said firm and therefore the order passed by the Tax Recovery Officer in O.P. No. 136/79-80 does not call for any interference and hence the suit may be dismissed with costs.

10. Issues settled by the trial court :

(a) Whether the fifth defendant was a partner of the arrack business in his individual capacity and not as a karta of the joint family consisting of himself and his sons ?

(b) Whether the share of defendant Nos. 1 to 4 in the joint family properties are not liable to be proceeded against by the plaintiff ?

(c) Whether the four-fifths share of the defendant Nos. 1 to 4 is not liable for attachment for recovery of tax arrears of the partnership firm ?

(d) Whether the orders of the Tax Recovery Officer are proper and valid and are not liable to be set aside ?

(e) To what relief ?

11. Evidence available on record

Witnesses examined for the plaintiff

PW-1—Ch. Gopalakrishna Murthy, Income-tax Officer

Witnesses examined for defendants

DW-1—T. Appa Rao (fifth defendant)

DW-2—G. Appannareddy

DW-3—G. Saryarao

DW-4—K. Appa Rao

DW-5—P. Bhoolokareddy

Documents marked for the plaintiff

Exhibit A1 dated 29-4-1980—Copy of order of the Tax Recovery Officer, Visakhapatnam.

Exhibit A2 dated 20-11-1976—Photostat copy of the application of the fifth defendant to the Income-tax Officer, C. Ward, Visakhapatnam.

Exhibit A3 dated 12-8-1976—Photostat copy of the return of income submitted by the fifth defendant for the assessment year 1963-64.

Exhibit A4 dated 12-3-1976—Photostat copy of the return of income submitted by the fifth defendant for the assessment year 1971-72.

Exhibit A5 dated 12-3-1976—Photostat copy of the return of income submitted by the fifth defendant for assessment year 1972-73.

Exhibit A6 dated 30-3-1977—Photostat copy of the assessment order of the Income-tax Officer, C.Ward, Visakhapatnam.

Exhibit A7 dated 19-12-1977 -do- for 1977-78.

Exhibit A8 dated 27-7-1979 -do- for 1978-79.

Exhibit A9 dated 20-2-1980-Photostat copy of the notice under section 148 of the Income-tax Officer, D. Ward, Visakhapatnam to the fifth defendant for the assessment year 1971-72.

Exhibit A10 dated 20-2-1980—Photostat copy of the notice under section 148 of Income-tax Officer, D. Ward, Visakhapatnam to the fifth defendant for the assessment year 1971-72.

Exhibit A11 dated 20-2-1980 -do-

Exhibit A12 dated 20-2-1980 -do- for 1972-73.

Exhibit A13 dated 20-2-1980 -do- for 1972-73.

Exhibit A14 dated 20-2-1980 -do- for 1972-73.

Exhibit A15 dated 10-6-1981—Photostat copy of the letter of the Income-tax Officer, A.Ward, Visakhapatnam to the fifth defendant.

Exhibit A16 dated 28-2-1985—Photostat copy of the order of the Assistant Commissioner of Income-tax, Visakhapatnam.

Exhibit A17 dated 26-12-1970—Photostat copy of the partnership deed between P. Raghavarao and 18 others.

Exhibit A18 dated 23-3-1971—Photostat copy of the application for registration of M/s. Visakhapatnam Gowda Association.

Exhibit A19 dated 30-11-1972-do-for declaration under section 184(7) of the Income-tax Act, 1961, for continuation of registration.

Exhibit A20 dated 28-7-1971—Photostat copy of the return of income of M/s. Sree Visakha Gowda Association for the assessment year 1971-72.

Exhibit A21 dated 26-3-1972 -do- of revised return for 1971-72.

Exhibit A22 dated 28-2-1976—Copy of the assessment order for the assessment year 1971-72.

Exhibit A23 dated 19-3-1972—Photostat copy of the return of income for 1972-73.

Exhibit A24 dated 26-3-1972 -do- of revised return for 1972-73.

Exhibit A25 dated 28-2-1976 -do- for the assessment order for 1972-73.

Exhibit A26 dated 25-2-1980—Photostat copy of the objection petition of defendant Nos. 1 to 4 to the Tax Recovery Officer, Visakhapatnam.

Exhibit A27 dated 12-8-1976—Photostat copy of the income-tax return submitted by the fifth defendant for 1964-65.

Exhibit A28 dated 12-8-1976—Photostat copy of the income-tax return submitted by the fifth defendant for 1965-66.

Exhibit A29 dated 12-8-1976—Photostat copy of the income-tax return submitted by the fifth defendant for 1966-67.

Exhibit A30 dated 12-3-1976—Photostat copy of the income-tax return submitted by the fifth defendant for 1967-68.

Exhibit A31 dated 30-3-1977—Photostat copy of the assessment order of the Income-tax Officer, C.Ward, Vizag for the assessment year 1969-70.

Documents marked for defendants

Exhibit B1 dated 21-2-1986—Copy of the order of Assistant Commissioner of Income-tax, Visakhapatnam for 1972-73.

Exhibit B2 dated 31-3-1984—Photostat copy of the assessment order for the assessment year 1971-72. Exhibit B3 dated 31-3-1984—Photostat copy of the assessment order for the assessment year 1972-73 of the Income-tax Officer, A. Ward, Visakhapatnam.

Exhibit B4 dated 19-2-1980 -do- of registration extract of sale deed for Rs. 400 executed by G. Venkayyamma in favour of the first defendant.

Exhibit B5 dated 29-1-1964 -do- for Rs. 1,500 executed by Mohammed Saheb in favour of the first defendant.

Exhibit B6 dated 24-6-1964 -do- for Rs. 1,000 executed by G.Nagireddi in favour of the first defendant.

Exhibit B7 dated 28-2-1976—Photostat copy of the assessment order for 1971-72.

Exhibit B8 dated 28-2-1976 -do- for 1972-73.

Findings recorded by the trial court in a nutshell

12. The learned Principal Subordinate Judge after referring to several decisions ultimately came to the conclusion that in the facts and circumstances of the case the fifth defendant was a partner of M/s. Visakha Gowda Association in his individual capacity investing his monies and not on behalf of the Hindu undivided family though he is a joint family manager and as such only his 1/5th share in the joint family property alone is liable to be proceeded against for realization of the tax. Further it was held that the four-fifth share of the undivided sons of the fifth defendant, i.e., defendant Nos. 1 to 4, who are not liable for auction for recovery of the income-tax arrears and ultimately came to the conclusion that the order under challenge does not suffer from any illegality and dismissed the suit.

13. In the light of the submissions made by the counsel on record, the following points arise for consideration in this appeal :

(a) Whether the findings recorded by the learned Principal Sub-ordinate Judge, Visakhapatnam dismissing the suit are to be confirmed or to be disturbed or set aside in the facts and circumstances of the case ?

(b) If so to what relief would the parties be entitled ?

14. Point No. 1 : The fifth defendant is the father of defendant Nos. 1 to 4 and the fifth defendant joined as partner in M/s. Visakha Gowda Association. It is the case of the plaintiff that the fifth defendant joined the said Association as one of the partners of M/s. Visakha Gowda Association representing the Hindu undivided family, in short referred to as “HUF” but however the specific stand taken by the defendants is that the fifth defendant joined as a partner in the said association in his individual capacity and not representing the joint family. The learned judge after appreciating the evidence available on record referred to the undernoted decisions :

Chamdrayya v. Sambayya [1966] (2) AN WR 393, Velu Padayachi v. Sivasooriam Pillai AIR 1950 Mad. 444 [FB], Luhar Amrit Lal Nagji v. Doshi Jayantilal Jethalal, AIR 1960 SC 964, M. R. Radhakrishnan v. Union of India [1959] 35 ITR 142 (Mad.) ; AIR 1959 Mad 71, Sidramappa Veerabhadrappa v. Babajappa Balappa, AIR 1962 Mysore 38, P. Murugayya Pillai v. S. Somasundaram Pillai, AIR 1957 Mad. 100, P.K.P.S. Pichappa Chettiar v. Chokalingam AIR 1934 PC 192, Ramakrishna Transports v. CIT AIR 1968 AP 34, Shanmuke-shwararao v. Venkatappaiah and Sons [1986] 2 APLJ 35, Benares Bank Ltd. v. Hari Narain AIR 1932 PC 182, Arakkal Rohini v. Arakkal Koottappanakkal A. K. Sethumadhavan AIR 1978 Ker. 119, Kanakarathanammal v. V.S. Loganatha Mudaliar AIR 1965 SC 271, G. Narayana Raju v. G. Chamaraju AIR 1968 SC 1276 and Lakshmi Ammal v. Meenakshi Ammal [1975] MLJ 199.

15. The learned judge appreciated in elaboration the oral evidence of PW-1 and also the oral evidence of DW-1, DW-2, DW-3, DW-4 and DW-5 as well and also recorded further findings in relation to documentary evidence as well : Exhibits A-1 to A-31 and exhibits B-1 to B-8 as well and ultimately came to the conclusion that the order under challenge does not suffer from any illegality whatsoever and accordingly dismissed the suit.

16. The fifth defendant was a partner in M/s. Visakha Gowda Association and his sons i.e., defendants 1 to 4 had chosen to contest the suit with all seriousness. The learned judge on appreciation of the evidence of PW-1, DW-1, DW-2, DW-3, DW-4 and DW-5 and also exhibits A-1 to A-31 and exhibits B-1 to B-8, recorded findings in detail and ultimately came to the conclusion that the order under challenge does not suffer from any illegality and ultimately dismissed the suit.

17. In the decision of J. Devaraja Rao’s case (supra) at paras 6, 8, 9 and 17, the Full Bench of this court observed (page 428) :

“6. Colebrooke’s translation was also accepted by the Supreme Court in S.M. Jakati v. S.M. Borkar, AIR 1959 SC 282. They observed that it is the pious duty of the sons to discharge their father’s debts not tainted with immorality or illegality. In Perumal Chetti v. Province of Madras, AIR 1955 Mad. 382 Chief Justice Rajamannar delivering the judgment of the Division Bench observed :

‘We have our doubts if that term had a precise and definite meaning even in the days of the Smritis. It is like “just and convenient”, “reasonable and prudent”, “justice, equity and good conscience”. To give the latest example it is an expression as elastic and indefinite as the expression “reasonable restrictions” in article 19 of our Constitution. Colebrooke translated the expression “avyavaharika” as “repugnant to good morals”. There have been other translations, like “improper” and “not lawful, usual or customary”. “Vyavahara” is a word which has more than one meaning. But we agree with Mr. Venkata Subramania Aiyar that the word has reference to the ideal of good conduct according to the notions prevailing at the material time. But we are unable to hold that any debt which the father ought not to have strictly contracted is necessarily a debt which is “avyavaharika”. There should be an element of moral turpitude involved in the debt. It is only then that it could be called “avyavaharika”‘.

Whatever may be the difference in the translations of this expression, it is now clear that the expression ‘avyavaharika’ has been understood as repugnant to good morals or tainted with immorality or illegality or involving some moral turpitude. Even if a wider meaning such as ‘improper’ is given there can be no doubt that the liability in the present case, namely, the liability of the father to pay arrears of income-tax which had accrued in respect of the business which he was carrying on cannot be said to be ‘avyavaharika’. In our opinion it is impossible to argue that the liability to pay taxes legally due to the Government is an ‘avyavaharika’ debt within the meaning of the texts as interpreted by the judicial decisions, some of which have been referred to above. It is stated that the assessment was made on an estimated income but even so the tax so levied would still be tax legitimately due at it has been held that even an estimate cannot be arbitrary and must rest on some rational basis. There would be some scope for argument if a penalty or fine had been levied due to the negligence or laches of the assessee or due to his non-compliance with any provision of law. As that is not the case here we express no opinion on that matter. We may also state that Mr. Rama Rao also did not seriously contend before us that the said liability would be in the nature of an ‘avyavaharika’ debt not binding upon the son. His main argument however, was that the exemption from liability of the son under the doctrine of pious obligation is not only in respect of an ‘avyavaharika’ debt, but in respect of the various classes of debts, mentioned in the several texts referred to earlier. He submitted that one class of debts which is specifically mentioned in the text of Usanas and the other texts is ‘sulka’. According to the dictionary meaning as well as the meaning given by the various recognized translators of the texts from time to time, the expression ‘sulka’ would also include a tax. As the smritis expressly state that the son is not liable to pay the ‘sulka’ which remained unpaid by the father it is argued that the son is not liable for the arrears of income-tax payable by the father in this case. It is very difficult at this distance of time to find out what the ‘Smriti’ text writers meant by the expression ‘sulka’. The dictionary meaning as given in Apte’s Dictionary is toll, tax, customs duty particularly levied at ferries, passes, roads. The other meanings of ‘sulka’ given are gain, profit, money advanced to ratify a bargain, purchase price of a girl ; money given to the parents of a bride ; a nuptial present ; marriage settlement or dowry presents given by the bridegroom to his bride. In the various translations, sometimes, the expression ‘toll’ is used, sometimes ‘tax’, sometimes ‘duty’. In arriving at the meaning of the expression used in the texts it is important to bear in mind the context in which these passages occurred. As observed already these texts refer to the exceptions to the general rule that a son is liable to pay the debts of his father. As pointed by the Privy Council in 70 Ind. App. 171 (AIR 1943 PC 142) most of the debts mentioned in the texts as debts which he need not pay, are of objectionable character, even if some type of taxes or duties were exempt from the doctrine of pious obligation for certain reasons which appealed to the ancient Smriti text writers ; it is for the court to decide in the context of the present society whether any particular tax liability is of such a nature as could be treated as one tainted with illegality or immorality or opposed to the right conduct as to bring it within the exceptions to the general rule that the son is liable to pay the father’s debt. We have no hesitation in holding that the liability to pay arrears of income-tax cannot be regarded as one such. On the other hand it appears to us that it is obligatory on the son that he should pay taxes which are legitimately due to the State by his father. Even from ancient times till the present day the liability to pay tax to the State is regarded as one of the foremost duties of the citizens. We cannot believe that the ancient law givers which laid so much stress upon the duty of the son to his father’s debt would have exempted him from payment of the taxes legally due by the father to the State. It has been repeatedly held that the son is liable to pay the debts of the father incurred during the course of trade which he had lawfully carried on. It does not stand to reason that while the son is liable to pay the debts of the father so incurred, he is not liable to pay the tax due in respect of the profits of that trade, or debts incurred by the father for the purpose of the payment of those taxes. In interpreting these ‘Smritis’ which were rendered thousands of years ago it is not safe to merely to take the dictionary meaning and apply it to the texts. In this connection it has to be remembered that these ‘Smritis’ also deal with religious and moral law. According to Hindu conception ‘Dharma’ is of widest significance and includes religious, moral, social and legal duties and can only be defined by its contents. The Hindu ‘Dharma sastra’ therefore deals with religious and moral law as well as civil and criminal law. It is true that the Smriti writers knew the distinction between ‘vyavahara’ or the like, the breach of which results in judicial proceedings, and the law in the widest sense. But having regard to the fact that all the old texts and commentaries are apt to mingle religious and moral considerations, not being positive laws, with the rules intended to be positive laws their Lordships of the Privy Council have repeatedly emphasized the necessity for caution in the interpretation of ‘Smritis’, videRao Balwant Singh v. Rani Kishori [1898] 25 Ind. App. 54 (PC). In Nidavolu Atchutam v. Ratnajee, AIR 1926 Mad. 323, Coutts-Trotter C. J. observed that the governing provision in the texts is that which excludes from the rule debts that are not ‘vyavaharika’ and particular instances given in the Smritis must be treated as a mere expression of opinion on the part of the authors as to what class of debts would fall under general words . . .

8. In Mayne’s Hindu Law it is stated that the expression ‘sulka’ in the Smritis is ambiguous. It is sometimes translated as a toll or a tax. Another meaning of the word ‘sulka’ is a nuptial present, given as the price of a bride. Reference is made to Haradatta’s translation where he assigns the meaning of bride price to ‘sulka’ and to the fact that this translation is supported by Sarvajna Narayana in his gloss on the text in Manu. Mayne is of the opinion that this stands to reason as a promise of bride price is not enforceable even according to the modern decisions and being unapproved marriage neither the liability to pay the bride price nor a debt incurred for the purpose of paying it can be lawful or proper (vyavaharika). Even if the meaning is not restricted to the last mentioned one, namely, the bride price, we are of the opinion that having regard to the context in which it occurs, ‘sulka’ must be confined only to such liability, though in the nature of tax or a duty, which would involve some moral turpitude on the part of the father or the incurring of which would be tainted with illegality or immorality.

9. The Bench of the Madras High Court in AIR 1955 Mad. 382 had to consider whether court-fee payable by the father in a litigation which he carried on comes within the expression ‘Danda’ used in the text which as has been noticed is also one of the specifically enumerated class of debts mentioned in the text. It was observed that the conception of the court-fee at the present day is radically different from ‘Danda’ which was imposed on the parties to a litigation in the days of ‘Smritis’, and that whatever the theory underlying the court-fee may be, it is clearly not in the nature of punishment. They observed that the conception of ‘Dharma’ and Nyaya changes and the liability even under the ‘Smritis’ would have to be judged by the present day notions and if judged by those notions, it could not be said that the liability to pay court-fee was in anyway inconsistent with right conduct. We are of the view that the same approach should be made in interpreting the expression ‘sulka’ in the same texts . . .

17. For all the reasons above stated we are of the opinion that Gopalakrishnan Nair J. was right in holding that the arrears of income-tax due by the petitioner’s father in respect of separate business prior to partition between him and his son can be recovered from the son after the partition under the doctrine of pious obligation.”

18. In the decision of Piara Singh (supra) the assessee was carrying on regular smuggling activity and while crossing Indo-Pak border into Pakistan he was apprehended and a sum of Rs. 65,000 recovered in currency notes was transferred from his person and when the assessee stated that he was taking the currency notes to Pakistan to enable him to purchase gold in that country with a view to smuggling it into India, the currency notes were confiscated and the Income-tax Officer initiated proceedings under the Income-tax Act, 1922, for assessing the assessee’s income and determining the tax liability and found that out of Rs. 65,000 an amount of Rs. 60,500 constituted the income of the assessee from undisclosed sources. In the said facts and circumstances on the question whether the loss of Rs. 65,000 arising from confiscation of currency notes was an allowable deduction under section 10(1) of the Income-tax Act, 1922, the Apex Court held that the deduction must be allowed inasmuch as the confiscation of the currency notes was a loss occasioned in pursuing the business and it was a loss in much the same way as if the currency notes had been stolen or dropped on the way while carrying on the business and it was further held that it was a loss which arose directly from the carrying on of the business and is incidental to it. The Apex Court applied the view expressed in Badridas Daga v. CIT [1958] 34 ITR 10 following the decision in CIT v. S.C. Kothari [1971] 82 ITR 794 (SC).

19. In the decision of Sidramappa Veerabhadrappa (supra) where the father carried on family kulachar of dyeing without any aid of ancestral nucleus and though the son assisted him in the business, it was held that the said dyeing business cannot be called family trade and subsequent starting of clothes business is not an extension of the trade.

20. In the decision of P. Murugayya Pillai (supra), it was held that there is no presumption that a business carried on by a member of a joint family is the joint family business or is there is any presumption that a business carried on by such a member in partnership with a stranger is a joint family business and there is no presumption that a business started by even the manager is a joint family business but if the joint family funds had been utilized in opening a new branch, then the new branch will be regarded as part of the old business.

21. In the decision of P.K.P.S. Pichappa Chettiar (supra), it was held that where the manager of a Hindu joint family entered into partnership with a stranger, the other members do not ipso facto become partners.

22. In the decision of Ramakrishna Transports (supra) it was held that where the managing member of a joint Hindu family enters into partnership with a stranger in relation to a business whose capacity in whole or in part is derived from the property or funds of the joint family, the family as a unit or the entire body of the family members do not ipso facto become partners in that partnership business and partnership will be confined to the strangers and such of the members of the family who actually entered into partnership with them and the members of the family in their personal or individual capacity can quoad their separate property enter into partnership with the karta of the joint family who represents the joint family.

23. In the decision of Shanmuke-shwararao (supra) it was held :

“The principles that emerge from a review of the above decisions are that the joint family as such cannot become a partner in the partnership firm and the karta or coparceners can become partners of the firm representing the joint family. The partners alone have to be looked into for the purpose of the partnership firm or for the transactions with the public. In a situation where a karta or a coparcener is a partner in the partnership firm the profits in such a firm belong to the joint family and in the event of the assessment under the Income-tax Act they are liable to be assessed in the status of the joint family. Apart from the other circumstances to get at the fact where the karta or the coparcener is a partner representing the family the crucial consideration is whether the joint family funds have been utilised for the purpose of becoming a partner either by way of capital in the partnership firm or otherwise.”

24. In the decision of Benares Bank Ltd. (supra) it was held that the business started by father as manager of the family cannot be said to be ancestral so as to render the minors interest in the joint family property liable for the debt incurred for the business.

25. In the decision of Arakkal Rohini (supra) it was held that where there is no proof that the business was the family business and not a new or independent business of the karta, the loan taken for such business could not be said to be for the binding necessities or for the benefit of the family.

26. In the decision of Kanakarathanammal (supra) it was held that where consideration for sale transaction proceeded for husband and his subsequent conduct showing his admission that title to the property vested in wife, the purchase by wife cannot be held to be benami for husband but she is herself the owner of the property and the fact that the husband was in possession and management of the property or that he was receiving the rents does not affect the position inasmuch as in ordinary Hindu families property belonging exclusively to a female member would also be normally managed by the manager of the family.

27. In the decision of G. Narayana Raju (supra) it was held that it is well-established that there is no presumption under the Hindu law that a business standing in the name of any member of the joint family is a joint family business and unless it could be shown that the business in the hands of the coparcener grew up with the assistance of the joint family property or with joint family funds or with the earnings of the business were blended with joint family estate, the business remains free and separate.

28. In the decision of Lakshmi Ammal (supra) it was held that there is no presumption of doing joint family business merely because the business is in the name of a member of a joint family.

29. There cannot be any quarrel relating to the propositions of law which had been laid down in the decisions referred to supra. This court has carefully gone through the evidence available on record and also the findings recorded by the trial court in elaboration as well. PW-1, the Inspector of Income-tax, deposed that the fifth defendant was a partner in Visakha Gowda Association and that the said Association had fallen in arrears of income-tax to a tune of Rs. 13 lakhs. He further deposed that the fifth defendant is the father of the defendant Nos. 1 to 4 and all of them constituted a Hindu joint family and the fifth defendant is the joint family manager. It was further deposed that the fifth defendant is a partner of the said Visakha Gowda Association in the capacity of karta of their Hindu joint family consisting of himself and defendant Nos. 1 to 4 and when the properties were attached belonging to their joint family defendant Nos. 1 to 4 filed objection petitions stating that the properties no doubt were joint family properties but their shares were not liable for attachment on the ground that the fifth defendant joined in the said Association in his individual capacity and not as karta of the joint family. The Tax Recovery Officer allowed their objection and raised attachment with reference to the four-fifth covering shares of defendant Nos. 1 to 4 under the original of exhibit A-1 orders dated 29-4-1980, in O.P. No. 136/79-80. He further deposed that exhibit A-2 is the photostat copy of the written statement dated 20-11-1976, filed by the fifth defendant before the Income-tax Officer, C. Ward showing the various properties inherited by him to his share in partition between himself and his brothers and that he has no self-acquisitions. Exhibit A-3 is the certified copy of the income-tax return of receipts and payments filed by fifth defendant for the assessment year 1963-64 in the status of Hindu undivided family. Exhibits A-4 and A-5 are certified copies of income-tax returns relating to the assessment years 1971-72 and 1972-73 filed by the fifth defendant in the status of Hindu undivided family which discloses that the family was having business income. Exhibits A-6 to A-8 are similar returns filed by the fifth defendant for the assessment years 1973-74, 1977-78 and 1978-79 along with receipts and payments statements. Exhibits A-9 to A-11 are the certified copies of the notices issued to the fifth defendant calling upon him to submit income-tax returns for the assessment year 1971-72 and exhibits A-12 to A-14 are the certified copies of such notices issued under section 148 for the assessment year 1972-73. The original of exhibit A-15 was issued to the fifth defendant on 10-6-1981, calling upon him to give explanation for investment of Rs. 88,800 in M/s. Visakha Gowda Association but he did not furnish any such necessary explanation. Exhibit A-16 is the certified copy of the orders of the Commissioner of Income-tax (Appeals) dated 28-2-1985, for the assessment year 1971-72 dismissing the assessees appeal against the orders of the Income-tax Officer. Exhibit A-17 is the certified copy of the partnership deed dated 26-12-1970, of M/s. Visakha Gowda Association showing the fifth defendant as third partner. Exhibit A-18 is a copy of Form No. 11 for the assessment year 1971-72 seeking for registration of the firm for the assessment year 1972-73. Exhibits A-20 and A-21 are the copies of returns of the firm for the assessment year 1971-72 and exhibit A-22 is the assessment order for the said year. Exhibits A-23 and A-24 are the returns for the assessment year 1972-73 of the said M/s. Visakha Gowda Association. Exhibit A-25 is the order of the relevant date. Exhibit A-26 is a copy of the objection petition filed by defendant Nos. 1 to 4 before the Tax Recovery Officer and exhibits A-27 to 31 are the copies of the income-tax returns of the fifth defendant submitted by him in the status of Hindu undivided family for the assessment years 1964-65 to 1969-70. PW-2 further deposed that he had been working in Visakhapatnam for the year 1982 whereas the said M/s. Visakha Gowda Association did their business from October 1970 to 30-9-1971, and thereafter they had not done any business. PW-1 deposed that he does not have any report in his record to show that the fifth defendant had got such and such properties. There were ten partners in Gowda Association and the arrack contract was on the basis of Government auction. PW-1 further deposed that P. Raghavarao bid the arrack auction and therefore all those 19 persons constituted themselves as a firm. They had not seized any accounts of the firm. PW-1 further deposed that either in the preamble or in the description of parties or in the body of the partnership deed it was not mentioned that the fifth defendant was there as karta of the joint family. There are unsigned statements to show that the partners had collected monies from others to make up the share capital as Rs. 88,800. Further PW-1 deposed that the signature of the fifth defendant appearing against S. No. 3 in exhibit A-18 does not show that he was signing as karta of their joint family and E.A-19 shows that the fifth defendant had only affixed his thumb mark against S. No. 19 and exhibits A-3 to A-5 and exhibits A-27 to A-30 are the photo copies of the income-tax returns submitted by the fifth defendant which were filed on 17-8-1976. This witness also deposed that exhibits A-3, A-4, A-5, A-6, A-27, A-28, A-29, A-30 and A-31 were filed on 12-8-1976. He further deposed that except the signature of the assessee, the entire form is in English and he cannot say whether the signature of T. Appa Rao (fifth defendant) appears to be only that of a person not educated but only learnt to sign. He further deposed that exhibits A-6 and A-31 also contain assessment orders and all the assessment orders were originally typed as individual and struck off and the words “Hindu undivided family” were written and they were not attested by anybody and in the statement of case that was typed as individual. Further PW-1 deposed that the original of exhibit B-1 was signed by the Appellate Assistant Commissioner and in the said order the Appellate Commissioner found that there is no material to show that the fifth defendant joined as a partner in his capacity as karta of the joint family. He further deposed that the return filed by the fifth defendant does not disclose that the fifth defendant joined in M/s. Visakha Gowda Association as karta of the joint family. In exhibit A-2 statement the fifth defendant did not state that he joined in the said Association as karta of the Hindu joint family and that he does not know personally whether the fifth defendant joined in the Association in his individual capacity or as karta of the joint family. Exhibit A-17 does not disclose the status in which the fifth defendant had joined in the partnership and at the time of assessment no enquiries were made about the status of any of the partners about their capacity either in their individual capacity or karta of the joint family.

30. The fifth defendant examined himself as DW-1 who had deposed that he is illiterate and he can sign only and further deposed that he joined as a partner in M/s. Visakha Gowda Association in his individual capacity and not on behalf of their joint family and that his family members expressed their reluctance for his joining as partner of the said Association. DW-1 further deposed that as a few friends advised him he joined as a partner by investing a sum of Rs. 5,000 by borrowing from one G. Atcharao a sum of Rs. 3,000 and from G. Appanna Reddi in a sum of Rs. 2,000 and that for his share in the partnership a sum of Rs. 88,500 was earmarked towards his contribution. Another 17 individuals joined to pool up the remaining amount of Rs. 83,000 and odd who gave the said amount towards their investments. Before the income-tax authorities, they had filed papers showing their investments also and exhibit B-2 is the photostat copy for the income-tax assessment for the year 1972-73. While he was partner of the said Association in which the original of exhibit B-2 order was passed it was noted that along with him 17 others also contributed the amounts. Exhibit B-3 is the photostat copy of the income-tax assessment order for the year 1972-73. One Narasimhamurthy was looking after the income-tax affairs on his behalf who was not having experience. DW-1 being illiterate, he was signing wherever he was asked to sign. Exhibit A-15 filed in O.S. No. 161/81 is the list showing the 17 partners who contributed the amounts towards the share required to be contributed in his name. The originals exhibits B-4 to B-6 are the original sale deeds under which his wife purchased the sites covered by items 1 to 3 of the A-Schedule. The claim petitions filed by his wife and his children 1 to 4 were allowed by the Tax Recovery Officer which orders are valid. Exhibits B-5 and B-8 are the photostat copies of the orders relating to the firm M/s. Visakha Gowda Association apportioning income among the partner. DW-1 also further deposed that the Income-tax Department is proceeding against him only and not against the other partners. His sons have nothing to do with the business carried on by him as a partner in the said Association. His sons are contesting the suit and the attachment effected over the shares of his sons is not valid and the Tax Recovery Officer upheld their contentions.

31. The evidence of DW-2 is that he lent the fifth defendant (DW-1) Rs. 2,000 in the month of September 1970 when he requested him to lend him Rs. 5,000 in connection with arrack auctions. DW-3 also deposed on similar lines. The evidence of DW-4 and DW-5 also is available on record and their evidence goes to show that these witnesses had contributed amounts to DW-1 towards his share of investment as a partner in the association aforesaid.

32. It is not as though the father-fifth defendant is dead. He is alive and was examined as DW-1. Though there is no quarrel to the propositions which had laid down in the decisions referred to supra, on facts, this court is thoroughly satisfied that since the learned judge recorded appropriate findings on appreciation of oral and documentary evidence available on record i.e., the evidence of PW-1, DW-1 to DW-5 and exhibits A-1 to A-31 and exhibits B-1 to B-8, this court is not inclined to disturb the well considered findings and accordingly the said findings are hereby confirmed.

33. Accordingly, the appeal shall stand dismissed. But however, in the peculiar facts and circumstances, let the parties bear their own costs.

[Citation : 331 ITR 248]

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