1966 (11) TMI 11 - HC - Income Tax

Court rules partnership share held by Ram Rakshpal as separate property, not part of family income

Commissioner of Income-Tax, UP Versus Ram Rakshpal, Ashok Kumar

The court determined that the 1/2 share held by Ram Rakshpal in the partnership firm is his separate property and not part of the Hindu undivided family's ... HUF - deemed dividend - Tribunal held that the income was personal income of the karta and not of the family - whether the 1/2 share held by RR in the partnership firm is held by him as a karta of the assessee HUF or in his individual capacity - held taht share was held by the son in his individual capacity Issues Involved:1. Determination of whether the 1/2 share held by Ram Rakshpal in the partnership firm of Messrs. Murli Dhar Mathura Prasad is held by him as a karta of the Hindu undivided family or in his individual capacity.2. Interpretation of the Hindu Succession Act, 1956, particularly Section 8, in relation to ancestral property under Mitakshara law.3. The effect of partition on the character of the property under Hindu law.4. The implications of the Hindu Succession Act on pre-existing Hindu law principles.Issue-wise Detailed Analysis:1. Determination of the Capacity in Which Ram Rakshpal Holds the 1/2 Share:The primary question addressed was whether the 1/2 share held by Ram Rakshpal in the partnership firm of Messrs. Murli Dhar Mathura Prasad is held by him as a karta of the Hindu undivided family or in his individual capacity. The court concluded that the income from the share inherited by Ram Rakshpal from Durga Prasad should be assessed as his separate property and not as part of the income of the Hindu undivided family. The court reasoned that the property devolved upon Ram Rakshpal by succession under Section 8 of the Hindu Succession Act, and it would continue to be his separate property until he decided to merge it with the property of the Hindu undivided family.2. Interpretation of the Hindu Succession Act, 1956, Particularly Section 8:The court analyzed Section 8 of the Hindu Succession Act, which lays down the scheme and order of succession, emphasizing that the Act provides a self-contained code on all matters relating to succession among Hindus. The court noted that the Act replaces pre-existing rules of Hindu law to the extent that it covers the subject matter. The court rejected the argument that the Mitakshara law's principle of unobstructed heritage should be read into the provisions of the Hindu Succession Act. The court emphasized that the Act intended to introduce uniformity in the law relating to succession and that the rules laid down in Section 8 must be followed exclusively.3. The Effect of Partition on the Character of the Property:The court explained that partition takes away the character of coparcenary property from the property which goes to the share of a coparcener upon division. However, the property obtained by a coparcener upon partition continues to be coparcenary property for him and his unseparated issue. In this case, the property that came to Ram Rakshpal's share could be regarded as coparcenary property for him and his issue. The court clarified that the business carried on by Durga Prasad after the partition was his separate property, and upon his death, it devolved upon Ram Rakshpal as his separate property under Section 8 of the Hindu Succession Act.4. The Implications of the Hindu Succession Act on Pre-existing Hindu Law Principles:The court discussed the implications of the Hindu Succession Act on pre-existing Hindu law principles, particularly the Mitakshara law. The court noted that the Act was intended to provide a comprehensive and self-contained code on all matters relating to succession among Hindus. The court rejected the argument that the rule of Mitakshara law, giving the grandson an equal right by birth with his father in the property of the grandfather, should be read into the provisions of the Hindu Succession Act. The court emphasized that the Act's provisions must be interpreted based on the clear words of the statute, and general considerations about the character of ancient and pre-existing law should not influence the interpretation of the Act.Conclusion:The court concluded that the 1/2 share held by Ram Rakshpal in the partnership firm of Messrs. Murli Dhar Mathura Prasad is held by him in his individual capacity and not as a karta of the Hindu undivided family. The court answered the question in favor of the assessee and against the department, assessing the costs of the reference at Rs. 250 and counsel's fee at Rs. 250.