Hindu undivided family status survives partition, but inherited property under intestate succession does not become coparcenary property.

A Hindu undivided family may continue to hold joint family property after partition, and income from property held by a smaller family consisting of the assessee, his wife and unmarried daughters is not taxable as the assessee's individual income. Property inherited by a son on his father's death is governed by the Hindu Succession Act, 1956; under the statutory scheme of intestate succession, that inherited property does not become coparcenary or ancestral property in the son's branch merely because he has sons. The reference was thus accepted only in part, with HUF status recognised for the first asset and denied for the inherited property.

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Issues: (i) Whether the income of a smaller Hindu undivided family consisting of the assessee, his wife and unmarried daughters was assessable in the hands of the assessee as an individual. (ii) Whether the property inherited by the assessee on his father's death constituted the Hindu undivided family property of his branch consisting of himself and his sons.

Issue (i): Whether the income of a smaller Hindu undivided family consisting of the assessee, his wife and unmarried daughters was assessable in the hands of the assessee as an individual.

Analysis: The property received on partition in 1962 continued to be held by the assessee as a joint family asset of the smaller family. A Hindu undivided family may consist of the assessee and his wife, and the mere circumstance that the assessee had unrestricted power of disposal did not convert the property into his separate property. The earlier Supreme Court decisions on the character of joint family property after partition governed the issue.

Conclusion: The issue was answered in the negative. The income was not assessable in the hands of the assessee as an individual and was assessable in the hands of the smaller Hindu undivided family.

Issue (ii): Whether the property inherited by the assessee on his father's death constituted the Hindu undivided family property of his branch consisting of himself and his sons.

Analysis: Section 4 of the Hindu Succession Act, 1956 gives overriding effect to the Act, and Section 8 read with the Schedule lays down a complete scheme of intestate succession. On that scheme, a son's son is excluded from the succession to the grandfather's separate property during the father's lifetime. The Act is a codifying statute and the earlier Hindu law cannot control the statutory scheme. The inherited property therefore did not acquire the character of ancestral or coparcenary property in the assessee's branch.

Conclusion: The issue was answered in the negative and against the assessee. The inherited property did not constitute Hindu undivided family property of the assessee's branch including his sons.

Final Conclusion: The reference was answered partly in favour of the assessee and partly against him, by recognising the smaller Hindu undivided family in relation to the first item of income while denying Hindu undivided family character to the property inherited from the father.

Ratio Decidendi: Under Section 8 of the Hindu Succession Act, 1956, succession to the property of a Hindu dying intestate is governed by the statutory scheme and the property inherited by a son does not, by that fact alone, become coparcenary property in favour of his sons; separately, a Hindu undivided family may subsist even after partition and hold joint family property.

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