07 December 2008
Nilesh Shah Writes: E mail: nilesh63@vsnl.com
Below is the text of 269 ITR 50.
These six connected income-tax appeals have been filed under section 260A of the Income-tax Act, 1961, by which the appellant has challenged the judgment,
dated February 27, 2004 of the Income-tax Appellate Tribunal, New Delhi. All these appeals have been decided by the impugned common judgment. Since they involve identical questions of law hence they are being decided by this common judgment.
We have heard Shri R. R. Agrawal, learned counsel for the appellant, and learned counsel for the Department.
The facts of the case are that on March 14, 1970, the agricultural land of Gayasen was compulsorily acquired under the U. P. Awas and Vikas Parishad Adhiniyam by the Meerut Unit of the U. P. Awas Evam Vikas Parishad. Gayasen died in the year 1977 intestate. After his death his assets devolved upon his sons, Giridhari Lal and Ramji Lal. No partition between Gayasen and his sons was done during the lifetime of Gayasen. On July 23, 1983, possession of the acquired land was taken over by the Meerut Unit of the U. P. Awas Evam Vikas Parishad. On August 23, 1990, Additional District Judge, Meerut, awarded enhanced compensation, solatium and interest to Giridhari- lal under section 18 of the Land Acquisition Act. On October 11, 1991, Giri- dharilal received Rs. 4,90,091.02. On November 2, 1991, he received further interest of Rs. 4,82,593.35. Thus, the total interest received is Rs. 9,72,684.37. On February 25, 1992, Girdharilal died. On March 31, 1992, proceeding under section 148 was initiated for the assessment years 1986-87 to 1991-92 by issu- ing notices to the legal heirs of the late Giridharilal and six assessment orders were passed under section 143(3) read with section 148 of the Act and the income-tax assessed was Rs. 1,33,924 in each assessment year in the status of an individual. The Assessing Officer denied the claim of the heirs of the late Giridharilal to be assessed in the status of a Hindu undivided family. On Feb- ruary 22, 1997, the Commissioner of Income-tax (Appeals), Meerut, allowed the appeals filed by the assessee and held the status of the late Giridharilal as a Hindu undivided family. He held that in the absence of a will the self- acquired property of a father dying intestate and the income thereon was in the status of a Hindu undivided family. Hence, he set aside the assessment orders.
On February 27, 2004, the Income-tax Appellate Tribunal set aside the aforesaid order of the Commissioner of Income-tax (Appeals), Meerut, dated February 22, 1997, and held the status of the late Giridharilal to be individual. The Tribunal further held that income by way of interest on the enhanced compensation was taxable in the hands of the late Giridharilal as individual.
Learned counsel for the appellant submitted that Gayasen having died in the year 1977 intestate, his property on his death became a Hindu undivided family property in the hands of his sons. Admittedly, there was no partition between Gayasen and his sons during the life time of Gayasen. We accept this submission of learned counsel for the appellant. It has been held by the Divi- sion Bench of this court in J. P. Verma v. CIT [1991] 187 ITR 465 that under the
Hindu law on the death of a Hindu male his property devolves upon his heirs in accordance with section 8 of the Hindu Succession Act. However, what has been overlooked by the Tribunal is that the nature of the property changes when a Hindu male dies. On his death even his self-acquired property becomes ancestral property in the hands of his sons. This is because under the Hindu law the property which a person inherits from his father, father¿s father and father¿s father¿s father is ancestral property. Hence even if the property in question was the self acquired property of Gayasen, it became Hindu undivided family property on his death in the hands of his sons. The Tribunal has held that after the death of Gayasen the self-acquired property devolved on his son, Giridharilal, in his individual capacity. This view is clearly incorrect. The property may have been the self-acquired property of Gayasen, but the moment Gayasen died the nature of his property changed and it came ancestral property in the hands of his sons and not their self- acquired property. In our opinion, the decision of the Supreme Court in the case of CWT v. Chander Sen [1986] 161 ITR 370 supports our view.
The basic fallacy of the Tribunal is that it was of the opinion that if the property is self-acquired property in the hands of a Hindu male it will remain self-acquired property even after his death. This is not correct as stated above. On the death it becomes ancestral property in the hands of his sons. ¿All property inherited by a male Hindu from his father, father¿s father or father¿s father¿s father, is ancestral property¿. (vide Mulla¿s Principles of Hindu Law).
For the reasons given above, these appeals are allowed and the impugned judgment of the Tribunal is set aside and the orders of the Commissioner of Income-tax (Appeals) dated February 22, 1997, is restored ---------------------------
This decision in 269 ITR 50 is inconsistent with the law because of the following:
When a Hindu dies intestate, his self-acquired property should devolve on the legal heirs as individual property. Section 4 of the Hindu Succession Act, which came into force with effect from June 17, 1956, provides that this Act will override the Hindu law prior to this legislation. In the earlier law before codification, what was inherited from the parent by a Hindu could be family property. Such law would no longer have application. Where the property was that of a Hindu joint family, the amount devolving on the son would retain the character of Hindu joint family, but not where it was held as individual property and such individual died on or after June 17, 1956. This distinction was pointed out in CWT v. Chander Sen [1986] 161 ITR 370 (SC) itself, where it held that the amount inherited by the son by way of intestate succession out of the separate property of the father would not have the character of joint family property. But where the amount was received out of undivided property, the character would be governed by the Hindu law. The Supreme Court had occasion to restate this law in CIT v. P. L. Karuppan Chettiar [1992] 197 ITR 646 (SC), which after considering the conflicting views on the subject, had favoured the view that in the case of succession in respect of divided property between the father and the son, the father¿s property on his demise would have the character of individual property and not joint family property as had been decided even earlier in Chander Sen's case (supra). Section 8 of the Hindu Succession Act would specifically provide for statutory devolution of personal properties excepting coparcenary property. Section 8 no doubt covers not only separate property but also Mitakshara co-parcenary property, but only in a case where he is survived by any female heirs through a pre-deceased coparcener as mentioned in clause I of the Schedule. The law as understood in Mulla's Hindu Law, 18th edition (page 337), reads as under :¿It has already been pointed out under Chapter XII (see Vol. I) and as 4 and 6 of this Act that the Act has brought about some radical changes in the law of succession without abolishing the joint family and joint family property except the extent to which it has modified the same¿and the former law relating to joint family continues to operate. The question has at times arisen as to whether a son who inherits the self-acquired or coparcenary property of his father (ancestral property) under the present section takes it as his separate property or holds it as property of his own joint family. There was divergence of judicial opinion on this vexed question which related to the doctrine of ancestral property in the hands of a father and his son acquiring interest in it by birth till the decision of the Supreme Court in CWT v. Chander Sen [1986] 161 ITR 370 (SC).¿The High Court in Girdharilal (Decd.) v. CIT [2004] 269 ITR 50 (All) had assumed that even self-acquired property of the father on intestate succession would have joint family character in the hands of the son purportedly following article 227(2) of Mulla's Hindu Law, which, however, was not a case, where section 8 of the Indian Succession Act had application. It had also referred to the decision of the Supreme Court in Chander Sen's case (supra), which had actually held otherwise. It also referred to the decision in J. P. Verma v. CIT [1991] 187 ITR 465 (All), which, however, relates to a case, where the amount was inherited after the death of the father, who held it as ancestral property under a family settlement even as pointed out in this case as under : ¿The Supreme Court concluded that the High Court was right and also observed that the view expressed by the High Court of Allahabad in CIT v. Ram Rakshpal Ashok Kumar [1968] 67 ITR 164, the High Court of Madras in Addl. CIT v. P. L. Karuppan Chettiar [1978] 114 ITR 523 [FB], the High Court of Madhya Pradesh in Shri Vallabhdas Modani v. CIT [1982] 138 ITR 673 and the High Court of Andhra Pradesh in CWT v. Mukundgirji [1983] 144 ITR 18 appeared to be correct and overruled a decision of the Gujarat High Court in CIT v. Dr. Babubhai Mansukhbhai [1977] 108 ITR 417 on this aspect of ancestral property and scope of the present section (section 8). It was also observed by the Supreme Court that ¿It would be difficult to hold today that the property which devolved on a Hindu under section 8 of the Hindu Succession Act would be Hindu undivided family property in his hands vis-a-vis his own son¿ (CWT v. Chander Sen [1986] 161 ITR 370 (SC))¿. Hence, the decision in Girdharilal's case (supra) is not consistent with law, since it is evident that Girdharilal¿s father admittedly holding the property as his individual property died in 1977, after June 17, 1956, when the new law came into force.
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