Dayabhaga heirs may form a Hindu undivided family by agreement and treat inherited shares as joint family property.

Female heirs inheriting under Dayabhaga law as tenants-in-common with defined shares may, by agreement, pool those interests into a Hindu undivided family and throw the inherited property into a common hotchpotch. The property can then acquire the character of joint family property despite the succession having produced separate shares. On that basis, the member's one-third inherited share is not assessable in her individual hands, because the property is treated as family property rather than separate ownership.

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Issues: (i) Whether the female heirs of a Hindu governed by the Dayabhaga school of Hindu law dying intestate could form a joint Hindu family by means of agreement; (ii) Whether such female heirs could impress upon their inherited property the character of joint family property; (iii) Whether one-third of the properties inherited from the husband was assessable in the hands of the assessee in the status of an individual.

Issue (i): Whether the female heirs of a Hindu governed by the Dayabhaga school of Hindu law dying intestate could form a joint Hindu family by means of agreement

Analysis: The heirs inherited the property as tenants-in-common with ascertained shares, but the Court held that there was no legal bar to their constituting a Hindu undivided family by agreement. The inherited shares could be thrown into a common hotchpotch and held jointly by agreement, even though succession had taken place to defined individual shares.

Conclusion: Yes. Female heirs governed by the Dayabhaga school could, by agreement, form a joint Hindu family.

Issue (ii): Whether the female heirs of a Hindu governed by the Dayabhaga school of Hindu law dying intestate could impress upon their inherited property the character of joint family property

Analysis: The Court accepted that inherited property with ascertained shares could be voluntarily treated as joint family property when the heirs agreed to pool their interests. The character of the property could thus be altered by mutual agreement and collective holding as a Hindu undivided family.

Conclusion: Yes. The inherited property could be impressed with the character of joint family property.

Issue (iii): Whether, on the facts and in the circumstances of the case, one-third of the properties inherited from her husband was assessable in the hands of the assessee in the status of an individual

Analysis: Once the Court accepted that the heirs validly constituted a Hindu undivided family and held the inherited properties as joint family property, the assessee's one-third share could not be assessed separately in her individual hands.

Conclusion: No. One-third of the inherited properties was not assessable in the assessee's individual hands.

Final Conclusion: The reference was answered in favour of the assessee on the first two questions and against the Revenue on the third, recognizing the validity of a joint Hindu family formed by agreement among the heirs and the corresponding tax treatment of the inherited properties.

Ratio Decidendi: Heirs who inherit property with defined shares under the Dayabhaga law may, by agreement, pool those shares and constitute a Hindu undivided family, in which event the property is assessable as joint family property and not in the individual hands of a member.

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