Kerala H.C : These are in all 15 references brought before us on an agreed convenience.

High Court Of Kerala

CIT vs. P.N. Srinivasa Rao & Ors.

Section 4

Asst. Year 1980-81, 1981-82, 1982-83, 1983-84, 1984-85

V.V. Kamat & K. Narayana Kurup, JJ.

IT Ref. Nos. 134 to 139, 146 to 149 & 163 of 1991 & 67 to 70 of 1996

10th October, 1996

Counsel Appeared

P.K.R. Menon and N.R.K. Nair, for the Revenue : C. Kochunni Nair and M.C. Madhavan, for the Assessee

JUDGMENT

V.V. KAMAT, J. :

These are in all 15 references brought before us on an agreed convenience. This is because that they relate to the asst. yrs. 1980-81, 1981-82, 1982-83, 1983-84 and 1984-85. There is another feature that both the husband and wife, namely, Shri P.N. Srinivasa Rao and Smt. S. Padma are concerned with them. To be precise. IT Ref. Nos. 146 and 147 of 1991 are by the Revenue and IT Ref. Nos. 148 and 149 of 1991 are by the said assessee, Smt. S. Padma, and that too with regard to the asst. yrs. 1982-83 and 1983-84. Similarly with regard to the asst. yrs. 1982- 83, 1983-84 and 1984-85 IT Ref. Nos. 134, 135 and 136 of 1991 are by the Revenue whereas IT Ref. Nos. 137, 138 and 139 of 1991 are by the assessee, Shri P.N. Srinivasa Rao.

2. In regard to the question expecting our answer, the basic assessment years are 1980-81 and 1981-82. The Tribunal declined to refer the questions applied for both by the Revenue as well as by the assessee, as a result of which there were two Original Petns. Nos. 3053 and 3118 of 1990 and 1222 and 2851 of 1991 by the Revenue as well as by the assessees, under s. 256(2) of the IT Act, 1961, preferred and by the common judgment therein dt. 4th Sept., 1992, this Court directed the reference of three questions which would be reproduced as may be necessary at an appropriate stage. It appears that although this Court passed the order as far back as on 4th Sept., 1992, directing references, on an earlier date 13th Sept., 1996, the Tribunal, Cochin Bench, was called upon to speed up the process of despatching the necessary references to this Court, so that the question in all these proceedings being common and in view of the position that with regard to the foundational asst. yrs. 1980-81 and 1981-82 the proceedings not having been received by this Court, the references relating to the subsequent assessment years (referred to above) had to be adjourned. As a result of the earlier order of this Court, the Tribunal in pursuance of the directions of this Court in the original petitions as stated above, referred the proceedings to this Court which are IT Ref. Nos. 67 to 70 of 1996 naturally in the context of the time lag. IT Ref. Nos. 67 and 68 of 1996 are by the Revenue and IT Ref. Nos. 69 and 70 of 1996 are by the assessee, Shri P.N. Srinivasa Rao, represented already in this regard through his heirs and legal representatives brought on record much earlier. Ancillary to the questions involved in these proceedings, for the asst. yr. 1981-82 in the matter of wealth-tax assessment, there is yet one more proceeding to be referred and that is IT Ref. No. 163 of 1991.

3. Learned counsel for the assessee in these proceedings as well as learned senior standing counsel for taxes in all these proceedings at the outset brought to our notice that the three questions which are the subject-matter of thproceedings of IT Ref. Nos. 67 to 70 of 1996 that are referred would not only govern the decision in other matters both for the subsequent assessment years as well as in regard to the proceedings relating to the wealth-tax assessment. But on reading the three questions they further simplified the situation to state before us and it is necessary to note in this context that after going through the entire record of these proceedings and hearing learned counsel for the parties at length, they are more than justified in this context, that for all purposes of these proceedings what is necessary to be answered would be question No. 1, which is as follows : “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the income from the hotel business belonged to the Hindu joint family consisting of the assessee, his wife, son and daughter and not the assessee in his individual capacity ?” It also needs to be made clear that learned counsel for the assessee justifiably stated that the daughter would not be the one belonging to the Hindu joint family as she has been married and consequently requested us to consider the contention that the Hindu joint family consisting of the assessee, his wife and son would be concerned with the income from hotel business and not assessee in his individual capacity. After carefully going through the questions framed in all these proceedings, apart from the characteristic fairness shown by two counsel, we also feel that this is the only question to be considered and consequently answered and the answer in regard thereto would by necessary implication answer all other consequential points of dispute, apart from the situation that other questions relate to the factual matrix and findings in regard thereto.

4. The factual matrix will have to be spread over as is available in an undisputed position from the material on record. (A) The assessee, Shri P.N. Srinivasa Rao, is the proprietor of Dwaraka Hotel. With regard to the asst. yr. 1980-81, on 30th Aug., 1980, the return was filed showing taxable income of Rs. 1,31,340. This Dwaraka Hotel has three components—(i) Bar section, (ii) Lodging section and (iii) Tourist taxi business. Initially, by an order dt. 30th March, 1983, with regard to the said asst. yr. 1980-81, as stated above, the return was filed which resulted in the total demand of Rs. 79,775 as per the order. For the asst. yr. 1981-82, the assessee, Shri P.N. Srinivasa Rao, filed his return on 29th Aug., 1981, admitting total income of Rs. 2,36,760. This was all in the status of an individual, as in the earlier years in regard to which there is no dispute. For this asst. yr. 1981-82, subsequently nearly after two years, on 23rd July, 1993, a revised return came to be filed reducing the total income to Rs. 25,980. It is at this for the first time the assessee contended that he is liable to be taxed with regard to 1/4th share in regard to the business of the Dwaraka Hotel as well as its building. The assessee contended that the Hotel Dwaraka belonged to an HUF consisting of himself, his wife, Smt. Padma, and two minor children—Miss P.S. Vidya and Master P.S. Sheshagiri. The assessee contended that consequent on the enactment of the Kerala Joint Hindu Family System (Abolition) Act, 1975, coming into force on and from 1st Dec., 1976, this HUF got automatically disrupted by operation of law taking this HUF property into the hands of the members of the family in four equal shares. We have already stated at the outset hereinbefore that learned counsel for the assessee brought up the daughter as the member of the HUF.

Before the ITO in pursuance of this revised return dt. 23rd July, 1983, as well as reduction of the total income, the assessee placed reliance on certain facts. (B) It is contended that in 1954 (17th Aug., 1954), the first document in point of time came into existence. This was between the assessee’s father, Shri Narayana Rao, and his sons, namely, Ramakrishna Rao, Vasudeva Rao and Ramachandra Rao. The document records that originally there was no ancestral property to the family. There is a reference to Ramakrishna Rao, the father of Shri Narayana Rao and the grandfather of the assessee. The document also records that Narayana Rao had two brothers—Shri Ramakrishna Rao and Shri Vasudeva Rao. The document then records that this constituted a joint family. (C) Thereafter, the assessee’s father, Narayana Rao, started business with his own self-acquired property, Amongst his four sons, the assessee’s elder brother, Shri Ramakrishna Rao, was employed as a Government servant and the other three brothers including the assessee were employed in various hotels. They pooled their resources together and established several hotels and regarded the property to be the property of the joint family. The property was acquired in the names of several members of the family, but it was agreed that all should be considered as the property of the family as a whole. As a result of the document dt. 17th Aug., 1954, the assets of the members together with the liabilities in regard thereto were taken into consideration and an arrangement was made between the father and the four brothers in the following manner : As such, after squaring up the assets and liabilities each of these five members (the father and four sons) received estate worth Rs. 20,000 each. It would be seen that the total assets of Rs. 68,903 as against the liability of Rs. 48,903 left a new asset of Rs. 20,000, equally and particularly as far as the present assessee is concerned. (D) With regard to what was of Shri Narayana Rao, there was a registered will of the father, Shri P.R. Narayana Rao, executed on 15th July, 1960. (E) Before going to tll, the document places certain factual position. It is made clear that Shri Narayana Rao had no ancestral property whatsoever and was maintaining the family at his own till the eldest son, Shri P.N. Ramakrishna Rao became a Government employee. The father, Shri Narayana Rao, and his wife were residing with the eldest son, Shri Rama Krishna Rao, a Government employee. Initially, the father, Narayana Rao, started a hotel business in1940 at Thoppumpady, Cochin. In the course of time his three sons, viz., Vasudeva Rao, Srinivasa Rao and Ramachandra Rao, were invited from Madras as they were working there as hotel employees. Thus all of them came together. Shri Narayan Rao purchased some of the immovable properties in Ernakulam and Cochin. Some immovable properties were also purchased by the sons. Particulars of activities are also available in the document. The youngest son, Shri Ramachandra Rao, opened Cochin Café near Rammohan Palace, Ernakulam (present High Court building). The buildings were constructed in the properties belonging to the father and four sons to do joint business. Cochin Café, in the course of time was closed and all the five members—the father and four sons joined Thoppumpady hotel business. A family business was started in the new building constructed with their sources under the trade name “New Woodlands” Boarding and Lodging, Ernakulam. The original Thoppumpady business was treated as a branch of the Ernakulam business. Vicissitudes and adverse circumstances led to the partition, as particularised hereinbefore. (F) The will dt. 15th July, 1960, was restricted to the assets of the father, Shri P.R. Narayana Rao, as is available from the deed of 1954, together with additions and aggregations in the course of the continuance of the business. It would be seen that the property referred to under Sch. II of the will in question is given to the two brothers—Shri Srinivasa Rao and Shri Ramachandra Rao, jointly as per the following necessary particulars of the will: “Schedule II (2) and (3) P.N. Srinivasa Rao and Ramachandra Rao 23 cents of land and building in Ernakulam bearing Municipal No. 21/12564 received as per partition deed dt. 17th Aug., 1954, is bequeathed to Shri P.N. Srinivasa Rao and Shri P.N. Ramachandra Rao jointly.” This would show that the business of the “New Woodlands” Boarding and Lodging, Ernakulam, was given by the father to the two sons, namely, the assessee, Shri P.N. Srinivasa Rao, and his younger brother, Shri P.N. Ramachandra Rao, jointly. They continued in regard to the said property on and after the death of the father, Shri Narayan Rao, in 1964 as the persons concerned with the property in question. This position undisputedly continued from 1964 onwards up to 25th Nov., 1970, which is the date of the release deed. (G) On 25th Nov., 1970, the assessee, Shri P.N. Srinivasa Rao, surrendered his right in favour of his younger brother Shri P.N. Ramachandra Rao in regard to the properties mentioned therein. The relevant portion of the release deed is as follows :”Release deed dt. 5th Nov., 1970, between Shri P.N. Sreenivasa Rao and brother P.N. Ramachandra Rao. By this release deed the assessee, Shri P.N. Srinivasa Rao, relinquished his right in the following items of properties : 1. 13 cents of lands and building thereon received by him as per registered 13 cents will of his father P.R. Narayan Rao dt. 15th July, 1960, along with his and brother, P.N. Ramachandra Rao, jointly building

3. Right in a multi-storeyed building bearing Municipal No. 33/190-A constructed jointly by Shri Srinivasa Rao, with his brother, P.N. Ramachandra Rao.” This would show that the assessee surrendered his right, title and interest in lieu of a total consideration in regard thereto of Rs. 65,000. (H) It is thereafter that the assessee, Shri P.N. Srinivasa Rao, in April, 1972, purchased Hotel Dwaraka, to be exact on 16th April, 1972, for an amount of Rs. 5,00,000. The particulars of this transaction show that Rs. 2,75,000 were paid on 16th April, 1972, and with regard to the balance of Rs. 2,25,000 it is specified that Rs. 25,000 to be paid within two months from 16th April, 1972 and balance of Rs. 2,00,000 to be paid within two years from 16th April, 1972. (I) With regard to the assessee, there is yet another relevant factual facet. The assessee was married in 1962 and his first daughter was born in 1963. It took 13 years thereafter for the son, Master P.S. Sheshagiri. On the basis of the above factual matrix, the ITO (annexure A-2) held that the assessee got a net asset of Rs. 65,000 in pursuance of the release dt. 25th Nov., 1970, executed by him in favour of his brother, Shri P.N. Ramachandra Rao, and the Hotel Dwaraka building and business were purchased by the assessee by document dt. 16th April, 1972. The ITO is of the view that this nucleus of Rs. 65,000 is not at all adequate enough to claim that the entire corpus belongs to the HUF and consequently rejected the contention of the assessee. The ITO found from the perusal of the record that the assessee was assessed to income tax in 1956-57, his first assessment having been completed on 22nd Feb., 1957, on his half share income from the registered firm of New Woodlands, Ernakulam, on a total income of Rs. 10,250. This was on the basis of his status as an individual and all subsequent income-tax assessments from 1956-57 to 1980-81 have been completed on the basis of the status of the assessee as an individual. It is also observed that this status as an individual is shown by the assessee himself in the income-tax returns. The assessee pleaded that this was so and the ITO has characterised this plea to be on account of ignorance, instead of appreciating it as a result of incorrect or improper advice. The ITO has drawn from this situation of continuance from 1956-57 up to1980-81 that the addition of the same position as far as the brothers of the assessee acting in the same fashion that a joint Hindu family or an HUF could not be understood.

The Kerala Joint Hindu Family System (Abolition) Act of 1975 came into operation on and from 1st Dec., 1976, automatically disrupting all the HUFs in Kerala. It is observed that unless a partition of the property by metes and bounds is effected, the Hindu joint family will have to be understood in continuance even by the IT Department. Reliance was placed on the decision of this Court in Sankaranarayanan Bhattathiripad vs. ITO (1985) 44 CTR (Ker) 62 : (1985) 153 ITR 562 (Ker) : TC 37R.305. However, the officer observed that there are only two coparceners, namely, the assessee, and minor son, P.S. Sheshagiri, who can claim partition of the property. The officer has observed that the wife only had a right to maintenance and the minor daughter a right to maintenance and also for marriage. In the light of the above discussion by the order dt. 26th Sept., 1984, the contention was rejected and treating the assessee as an individual, tax payable was determined at Rs. 1,74,671 and giving credit to the amounts already paid, total demand was made of Rs. 58,190. Needless to say that simultaneously penalty proceedings under s. 273(1)(a) were ordered to be initiated.

The assessee’s appeal to the CIT(A), Ernakulam, it will have to be said, received a very casual treatment. The question even factually requiring the entire discussion upto now has been wound up by the first appellate authority in just two paras Nos. 6 and 7. The first appellate authority observes that the asset is built up by individual enterprises. The assessee could not have built up a business of this magnitude with the amount of Rs. 20,000 obtained on partition with an almost equal amount of liability tagged on to that. There is every reason to hold that the business carried on by the appellant is only his individual business and the income from that business should be properly assessed to tax as his individual income. Thus in para 7, the authority proceeds on the assumption of a family nucleus to observe that w.e.f. 1st Dec., 1976, the business cannot be deemed to have been partitioned and run by the appellant and his minor son as two different individuals so as to assess only a portion of the business income in the hands of the appellant. It is observed that the business is a composite asset and the income therefrom is to be treated as the income of the partners who have jointly exploited it. The appellate authority still proceeds at a tangent to observe that the entire business income will have to be again assessed as the income of the appellant representing the BOI consisting of himself and his minor son. We have reproduced the entire discussion. We are at pains to observe even with the required judicial restraint, that the first appellate authority has not made any attempt even to understand the situation not to talk of the basic principles of Hindu law.

The Tribunal, Cochin Bench, was left with the situation to do the best of a bad job and this has been done. The Tribunal had given importance to the factual particulars of the assessee himself. The Tribunal has recorded that the assessee was a bachelor until 1962. In January 1962, he got married to Smt. Padma and in 1963 he had a daughter, Miss. P.S. Vidya. A son—P.S. Seshagiri, was born in March, 1975. The Tribunal has also recorded that the document of 1954 sets out the history of the properties and the families and the fact that they were treated as joint family properties and divided amongst the sons. The Tribunal has also emphasised awareness that the father, Narayana Rao, had no ancestral nucleus and also the fact that self-acquisitions were treated as joint family properties along with the earnings of his son and then recorded partition of division amongst him. Taking the situation further in the context of time, the Tribunal has observed that as far as the assessee is concerned his share was valued at Rs. 20,000. The Tribunal has also recorded thereafter that the assessee received an amount of Rs. 7 lakhs on retirement from the business and will have to be understood as representing the joint family property nucleus which was invested in the Dwaraka Hotel. The Tribunal found on the basis thereof that the income of the joint family property belonged to the joint family consisting of the assessee, his wife, son and daughter. The Tribunal, thereafter dealt with the provisions of the Kerala Joint Hindu Family System (Abolition) Act, 1975. As a consequence, the Tribunal determined the share of the assessee to be 1/4th after setting apart the amounts required for maintenance and marriage expenses. As notional partition is to be confined to coparceners, the Tribunal determined the share of the assessee at half of the income arising from the business and issued the necessary directions to the ITO to exclude half of the income from business and proceeded with the consequential recomputation of the total income.

We have, elaborately spread over the factual matrix emphasizing the manner in which the parties looked at each other. The father, Narayana Rao, at the initial stages really had the walking stick support of the eldest son, Ramakrishna Rao. However, Shri Narayana Rao engaged himself in the hotel activity and there are enough particulars in regard thereto. Initially, there was a hotel near the building which is now the building of this institution itself. That was changed. Shri Narayana Rao called his other sons also who were employees in the hotels at Madras. An employee in the hotel at Madras prior to 1954 could be appreciated in the light of the efforts of Narayana Rao to bring them together. The particulars of the conduct of the dramatis personae show that there was an element of togetherness and efforts in regard thereto. This togetherness will have to be understood as synonymous with jointness. They continue, and the partition deed was the be all and end all of the situation in the final retirement of the father. The father kept with him the stated property which is the undisputed property on which the New Woodlands, Boarding and Lodging House stood thereafter. The material on record shows that even thereafter the father continued at least from 1954 to 1960. It will have to be understood that this situation continued even from 1960 up to 1964, the year of death of the father, Shri Narayana Rao. Although by the document of will dt. 15th July, 1960, Shri Narayana Rao had given what he had to his last two sons—Shri Srinivasa Rao, the present assessee, and his younger brother, Shri Ramachandra Rao. Therefore, at least from the death of Shri Narayan Rao in 1964, Shri Srinivasa Rao and his younger brother, Shri Ramachandra Rao, continued to have connection with this property which will have to be understood to be in the name and style of New Woodlands, Boarding and Lodging House. Both of them continued together which cannot be understood to be anything other than jointness. It was in 1970, to be precise on 25th Nov., 1970, the assessee got released by the release deed. It will have to be understood that the assessee got released from his jointness and received the total consideration of Rs. 65,000. This is with regard to the connection of the assessee with the property in question, New Woodlands, Boarding and Lodging. At the other end, the factual matrix is not uncertain. The present assessee—Srinivasa Rao was an individual up to the year 1962. He was married with Smt. Padma, had a female child Miss Vidya and 13 years thereafter in 1975 a male child Master Sheshagiri was born. These facts will have relevance in the matter of consideration to find out as to whether the HUF has to be considered.

The factual matrix places on record the golden thread of continuance of jointness. The attempt on the part of Shri Narayana Rao even to bring those who had left for gainful employments back to the common shelter, all of them had come. One of them was trying independently and later preferred to join and came under the common umbrella of the father, Shri Narayan Rao. On a clear understanding, a deed was entered into by way of an arrangement. This also continued even thereafter and the father, Narayana Rao, was not idle. He had his own seat and a bowl before him to deal with it. What he had, is the subject-matter of the will dt. 15th July, 1960. The will has given the two brothers what was legally owned by the father. There is no dispute that what was given by the father as a result of the will dt. 15th July, 1960, is the property which is now known as New Woodlands Boarding and Lodging. The process of undisputed positions show manifestations of further continuation. The father expired in 1964 and the two brothers—Shri Srinivasa Rao, the present assessee, and his younger brother, Shri Ramachandra Rao, continued together. They continued together well nigh for a period of seven years and it is thereafter there was a release deed dt. 25th Nov., 1970, releasing Shri Srinivasa Rao, the assessee, on receipt of Rs. 65,000 as total consideration. If the two brothers were joined and continued, to be so from 1964 at least up to 1970 and that too in connection with the business, the assessee must have gathered for himself during the period in question. More important and vital is the aspect that what was Srinivasa Rao, the assessee, was he an individual ? Could he be understood to be an individual in law, when he was married in 1962 ? A father of a daughter in 1963 and even thereafter the father of the male heir, Master Sheshagiri, in 1975. Apart from the running golden thread of jointness which is available in the neatly spread over factual matrix, a Hindu is never born as an individual. In law with reference to manifold aspects, he is in the family and it is of joint Hindu family. The other members of this joint Hindu family are necessarily born earlier and in such a situation, a Hindu who is born, joins them. This is about the joint Hindu family. It is fundamental as is available in Chapter XII dealing with the “Joint Hindu family corparceners and coparcenary property under Mitakshara Law,” especially in cl. 212 that a joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. The joint Hindu family with reference to the property either inherited or acquired by it is known as Hindu coparcenary. However, a Hindu coparcenary is a much narrower body than the Hindu joint family whereas the Hindu joint family takes within itself the wives and unmarried daughters. A Hindu coparcenary is narrower in that sense. A Hindu coparcener, generally speaking, includes only those persons who acquire by birth an interest in the joint or coparcenary property. These are necessarily the male members of the three generations. These are the sons, grandsons and great-grandsons of the holder of the joint property for the time being. Therefore, a joint or an HUF may consist of a single male member and other females. However, a Hindu coparcenary has to be understood with reference to rights by birth with regard to an interest in the joint or coparcenary property. What follows from this position is that when at one end an HUF is a situation which is understood not with reference to the existence of a joint estate as an essential requisite in regard thereto. A family which does not own any property may still have the character of a Hindu joint family. This jointness is understood in terms of faith and food. Even then possession of joint family property is not a necessary requisite for the understanding of an HUF. This is because a Hindu is born as a member of the joint family. Natural corollary of this is that an HUF may not possess property by inheritance. Such an HUF may consist of a male Hindu, his wife and his unmarried daughter. This is a situation more settled by a catena of decisions of the apex Court, in Gowli Buddanna vs. CIT (1966) 60 ITR 293 (SC) : TC 37R.121, Sitabai vs. Ramachandra, AIR 1970 SC 343 and N.V. Narendranath vs. CWT (1969) 74 ITR190 (SC) : TC 65R.557. In a similar way an HUF may also consist of a male Hindu and the widow of his deceased brother. It may also consist of a male Hindu and his wife only. All that is required is that there are two members. Another feature of an HUF is that its composition may alter in the process of passage of time. In other words, in the context of the situation Narayana Rao and his four sons who continued to be joint would be the members along with the female members of the HUF. The position may get distributed and this may be one of the features of their pattern of behaviour. Still their jointness is writ large on the material before us. What Narayana Rao possessed has become the subject-matter of a will dt. 15th July, 1960, and this has been given and it is so precisely stated that it is so given jointly to the two brothers, Shri Srinivasa Rao and Shri Ramachandra Rao. With regard to the property in question, Shri Srinivasa Rao and Ramachandra Rao would have to be understood to continue as HUF thereafter, after the death of Narayana Rao in 1964. At the other end Shri Srinivasa Rao who was an individual up to the year 1962, on marriage with Smt. Padma would have to be understood with reference to the Hindu joint family and thereafter as a result of the birth of their daughter, Miss Vidya, the joint family will have to be understood to be inclusive of her. This position continued up to the release deed dt. 25th Nov., 1970. With regard to the property, the assessee, Shri Srinivasa Rao, was the only male member and in pursuance of the release deed having received Rs. 65,000 out of the joint family property or Hindu coparcenary between the two brothers he became separate. This may be with regard to the property but as far as Srinivasa Rao and his wife and unmarried daughter are concerned, this joint Hindu family continued thereafter. The property and business of Dwaraka Hotel became the property of this joint Hindu family. Till the birth of the son in March, 1975, this joint Hindu family consisted of Shri Srinivasa Rao, his wife and daughter if she was unmarried during the time and with the birth of the son Master Sheshagiri, there was another member acquiring rights by birth changing the situation of the Hindu coparcenary altogether, making him also a member of the Hindu coparcenary with regard to the property which is the subject-matter of the proceedings. We would like to emphasise here that learned counsel for the assessee has categorically stated that the daughter would not be counted, probably, we feel that because of her being a married daughter.

14. The birth of the son gave a meaning to the Hindu coparcenary property. The position with regard to the interest in the Hindu corparcenary as of a fluctuating character is too elementary to need any support because it is axiomatic that no individual member of any joint family can predicate because the interest in the coparcenary is of a fluctuating character and it is not predicable in a precise manner. Such an interest is capable of being enlarged by the exit of any member, equally capable of being reduced as a result of the entry by birth of a male member. Such a situation becomes necessary only in the event of an occasion of partition. Otherwise, it is axiomatic that the interest of a coparcener has undivided coparcenary interest of fluctuating character. In the context of the situation it would flow as a consequence that it is not necessary that at any point of time a joint Hindu family must have connection with ancestral property. It is, therefore, that the principles of law developed a situation of presumption. Generally speaking, the normal state of every Hindu family is joint. Such joint Hindu family is joint in food, worship and estate and in the absence of proof of division and not by way of an arrangement, until the contrary is proved the family will have to be understood as joint. Such a presumption is stronger in the case of brothers than in the case of cousins and so on, making the presumption weaker and weaker in the context. The brothers are for the most part to be understood to be undivided and cousins and second cousins are generally separated. This is with regard to the person concerned with the joint Hindu family.

At the other end with regard to the Hindu coparcenary property this is not the situation. The situation is not of a presumption.

The above discussion relating to the position of law relevant to the factual matrix would show that the assessee, Shri Srinivasa Rao, his wife, Smt. Padma, and the daughter born in 1963 would have to be understood as a joint family. Srinivasa Rao in his turn joint with his brother, Ramachandra Rao, up to the date of the release deed dt. 24th Nov., 1970. The assessee, Srinivasa Rao, as a result of the release deed taking an amount of Rs. 65,000 from him out of the said property could not be understood as an individual as has been thought of by the authorities. He will have to be understood as a member of the joint Hindu family with an amount of Rs. 65,000 received from the coparcenary property till then consisting of himself and his younger brother. The record shows that in the joint business with his brother he had collected the amount with which the property and business of Dwaraka Hotel was purchased. The property and business of Dwaraka Hotel will have to be understood as the property of the joint Hindu family. The said joint Hindu family then consisted of Shri Srinivasa Rao, his wife and, if the daughter was not married, she also till the birth of Seshagiri on 30th March, 1975. The factual matrix is abundantly clear leaving no relationship with the earlier track record. It was this family that continued on the date of the advent of the Kerala Joint Hindu Family System (Abolition) Act, 1975.

Learned senior standing counsel for taxes was more than vehement with regard to the factual position that the document of 17th Aug., 1954, records that the properties dealt with therein were self-acquired properties of Shri Narayana Rao. In fact, learned counsel pinpointed the contents of the document to the effect that Shri Narayana Rao, the assessee’s father, had absolutely no ancestral properties whatsoever and through his own efforts he was maintaining his family and that after the eldest son, Shri P.N. Ramakrishna Rao, got a Government employment, Narayana Rao and his wife were staying with his eldest son, Shri Ramakrishna Rao, with his financial help.

Placing reliance on the two decisions of the apex Court, in Goli Eswariah vs. CGT (1970) 76 ITR 675 (SC) : TC 35R.247, and Mallesappa Bandeppa Desai vs. Desai Mallappa alias Mallesappa, AIR 1961 SC 1268, learned counsel contended that an HUF is not a creature of contract. What is necessary is the blending of the separate property of a coparcener having an interest in the coparcenary property of his separate property with the coparcenary property.

In Goli Eswariah’s case (supra) the question related to the GT Act, 1958, as to whether when a Hindu coparcener threw his self-acquired property into the common stock of undivided property it could amount to a gift and it is in this connection the apex Court has observed that an HUF is not a creature of contract. It is further observed in the context that the Act by which the coparcener throws his separate property into the common stock is an unilateral act and in regard to it there is no question of either the family rejecting it or accepting it. He makes no gift under Chapter VII of the Transfer of Property Act. We are afraid that the decision cited would be helpful in the context of the factual matrix that deals with the further flow of the situation in the context of the passage of time discussed by us hereinbefore. In fact, the document of 17th Aug., 1954, would show that nature of jointness and this is in a situation that existence of the ancestral property is not a must in the situation.

The apex Court in the case of Mallesappa Bandeppa Desai vs. Desai Mallappa Alies Mallesappa (supra) deals with the member of joint Hindu family blending his self-acquired property with the property of a joint family either by bringing his self-acquired property into a joint family account, or by bringing joint family property into a separate account. The apex Court placing reliance on the earlier decision of the Privy Council in Rajanikanta Pal vs. Jagamohan Pal, AIR 1923 PC 57, the question arose in connection with a proceeding for partition of an undivided Hindu family property. This was in regard to the plaintiff’s averments that the manager, respondent No. 1, deprived them of their legitimate share and refused their request for partition. It is in the context of such a dispute between the parties the apex Court was concerned with the question with regard to the item of property which was the separate property of a coparcener desiring to blend his separate property with the coparcenary property. We are equally afraid that the observations will not declare the rule that the joint Hindu family cannot be understood in the context of the absence of ancestral property altogether. It will have to be appreciated that the jointness is of the persons and for this jointness the situation as to whether there is property or not, is wholly irrelevant. The situation of jointness has to be accepted as the basic facet of the life of a Hindu. Any acquisition of property flowing from this situation of jointness will have to be understood as Hindu coparcenary property and the rights in regard thereto would have to be understood as undivided interest of the members of the Hindu coparcenery. In our judgment, the decision relates to the situation out of context to the requirement of the situation before us. To sum up the position of law there need not be more than one male member to understand an HUF. There can be an HUF even comprising female members even if the family is reduced to a sole surviving coparcener with other family members. The real situation is that the manifestation of jointness and the very basic foundation that the Hindu is born as a member of the family. For all the above reasons, the Tribunal would have to e held justified that the income from the Dwaraka Hotel business and the building belonged to the Hindu joint family of the assessee Srinivasa Rao, his wife Smt. Padma, and son Sheshagiri, and as has been fairly stated by learned counsel for the assessee, not the daughter, Vidya. The Tribunal was also further justified in directing the ITO to exclude half of the income from business and recompute the total income. Needless to state that our above answer would rule the question of assessment not only of the subsequent years but also of the wife, Smt. Padma (subject-matter of IT Ref. Nos. 146 to 149 of 1991) and in the matter of wealth-tax assessment for the years 1981- 82 (subject-matter of IT Ref. No. 163 of 1991.

We answer the question in the affirmative, except with regard to the daughter in favour of the assessee and against the Revenue. In view of the above, we decline to answer all other questions.

[Citation : 232 ITR 730]

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