Surjit Lal Chhabda v. Commissioner of Income Tax

A man with a wife and an unmarried daughter, but no son, declared his rented lodge to be joint family property. The Supreme Court held that the three of them formed a Hindu undivided family (a family treated as one taxable unit). It still held the rent taxable as his own income.

Quick Revision

Parties

Surjit Lal Chhabda — appellant; the assessee. He claimed that the rent of Kathoke Lodge should be taxed in the status of a Hindu undivided family.

Commissioner of Income Tax, Bombay — respondent; the revenue. It resisted the claim to assess the rent in the family's status.

Procedural History

1. The Income-tax Officer rejected the claim for the assessment year 1957-58. He held that no joint family property existed to blend with, and that there can be no Hindu undivided family without undivided family property.
2. The Appellate Assistant Commissioner disagreed with the Income-tax Officer on both points. He still dismissed the appeal on two other grounds.
3. The Appellate Assistant Commissioner found that the appellant dealt with the income as before, so the declaration was not acted upon. He also held that the income could be taxed in the appellant's hands as the sole male member.
4. The Income-tax Appellate Tribunal accepted the declaration as genuine. It rejected the finding that the declaration was not acted upon.
5. The Tribunal held that the appellant was the Karta (the manager of the family). How he dealt with the income was irrelevant.
6. The Tribunal still held that he, as sole surviving coparcener (a member who takes a birth-right in joint property), kept the same absolute interest as before. In law the property remained his separate property.
7. The appellant asked the Tribunal to refer five questions to the High Court. The respondent applied for one other question to be referred.
8. The Tribunal referred only one question to the Bombay High Court under section 66(1) of the Income-tax Act, 1922. It asked whether the income of Kathoke Lodge was to be assessed separately as the income of the Hindu undivided family of which the assessee was karta.
9. The High Court answered against the appellant in Income Tax Reference No. 29 of 1963. Its judgment is dated 8/9 July 1969 and reported in 75 I.T.R. 458.
10. The appellant came to the Supreme Court by special leave in Civil Appeal Nos. 1819-1821 of 1970.

Facts

1. The appellant, Surjit Lal Chhabda, had three sources of income. He had a share in the profits of two partnership firms. He received interest from bank accounts. He received rent from an immovable property called Kathoke Lodge.
2. These were his self-acquired properties (property he earned himself). Until the assessment year 1956-57 he was assessed as an individual on their income.
3. On 26 January 1956 he made a sworn declaration before a Presidency Magistrate in Bombay.
4. He declared that he had thrown Kathoke Lodge into the family hotchpot. His purpose was to impress it with the character of joint family property.
5. He declared that he would hold it as the Karta (the manager) of a joint Hindu family. The family was himself, his wife and one child, an unmarried daughter.
6. In the assessment proceedings for 1957-58 he argued that he had given up all separate claims to Kathoke Lodge. He said its income should be assessed in the status of a Hindu Undivided Family.
7. The appellant had no son.

Issues Raised

1. Can a single male form a joint Hindu family with his wife and unmarried daughter?
2. If so, can the Karta of such a family impress his self-acquired property with the character of joint family property by throwing it into the family hotchpot?
3. Can the income of such property be assessed as the income of the joint family?
4. Is it open to the Department to argue, before the Supreme Court, that no joint family property existed to blend with and so the declaration was ineffective?

Arguments Contended

For the appellant (assessee)

• A male member of a joint Hindu family can convert self-acquired property into joint family property by throwing it into the common hotchpot.
• For this purpose there need be no ancestral or joint family nucleus.
• For this purpose there need be no more than one male in the joint family.
• Kathoke Lodge was impressed with the character of joint family property. Its income belonged to the joint family, of which he was Karta and his wife and unmarried daughter were the other members.
• Before the Supreme Court, counsel cited several High Court decisions against the Department's new point.
• Before the Supreme Court, counsel argued that the Privy Council erred in Kalyanji's case on the income of Kanji and Sewdas from assumed ancestral property. So that part should not be followed. This rested on this Court's disapproval of some Privy Council observations.

For the respondent (Commissioner of Income Tax)

• It is contrary to the basic concept of a Hindu Undivided Family that a single male along with females could form one.
• A joint Hindu family can include a wife and unmarried daughters. But a sole male member cannot constitute one along with females.
• For forming a joint Hindu family there must be more than one male capable of claiming partition (division) of the joint family property.
• In the alternative, a single male could form a joint Hindu family along with a coparcener's widow, who can make an adoption to her deceased husband. He could not do so with his own wife and unmarried daughter.
• In the High Court, the Department argued that blending (voluntarily merging separate property into the joint stock) needs a coparcenary and also coparcenary property. It did not press this point after some discussion.
• Before the Supreme Court, the Department argued that Hindu law has only the doctrine of blending. The family hotchpot was empty before the declaration. So there was nothing to blend with, and the declaration did not convert the property.
• Before the Supreme Court, the Department argued that there was no antecedent history of jointness. So the appellant could not form a joint Hindu family with his wife and daughter.
• The Department relied on the Privy Council's decision in Kalyanji's case.

Court's Reasoning

Judgment of the Court, delivered by Chandrachud, J.

1. Noted: The High Court said it would not go into the larger questions. It rested its decision on whether Kalyanji's case was correctly applied.
2. Noted: The High Court assumed that a joint Hindu family can lawfully consist of a single male, his wife and unmarried daughter. On that basis, Kathoke Lodge became property of the Hindu undivided family from the date of the declaration.
3. Noted: The High Court then held that the assessee had no son and so there was no undivided family. His ownership of the property and its income remained as before. He was like a sole surviving coparcener, free to dispose of the property and income.
4. Noted: The High Court said his right to the income under his personal law was unchanged. So it held that Kalyanji's case covered him and the income was individual income. It said: "But the assessee has no son and therefore no undivided family."
5. Noted: The Court said the High Court preferred wholly to rely on the apparent magic touch of Kalyanji's case. It did not examine the principles of Hindu law on joint families.
6. Noted: The Court said an examination of fundamentals might have saved the High Court from an inconsistency. The High Court's reasoning was inconsistent. It assumed a single male, wife and daughter can form a joint family. Then it said there was no undivided family because there was no son.
7. Why: Joint family and undivided family are synonymous terms. Also, a joint family of a single male, his wife and daughter by definition has no son. If there were a son, there would be two males.
8. Noted: For this limited purpose, a study of Sastric texts, digests and commentaries is not needed. A century of judicial decisions has given a legal form to what was largely a mix of religious and moral edicts with rules of positive law.
9. Noted: Apart from the piecemeal codification of some branches, such as marriage, succession, minority, guardianship, adoption and maintenance, Hindu law today is judge-made law. This does not reduce the weight of Smritis like the Yajnavalkya Smriti. It does not reduce Vijnaneshwara's commentary, the Mitakshara.
10. Noted: The appellant is governed by the Mitakshara school. That has no special consequence here.
11. Held: The differences between the Mitakshara and Dayabhaga schools on the birth-right of coparceners and on inheritance have no bearing on this appeal. They do not affect whether a single male can form a joint or undivided family with his wife and unmarried daughter.
12. Noted: A Dayabhaga joint family, like a Mitakshara family, is normally joint in food, worship and estate. In both systems the joint family property may consist of ancestral property, joint acquisitions and self-acquisitions thrown into the common stock.
13. Held: Whatever school of Hindu law governs a person, the basic concept of a Hindu undivided family is the same, as to who can be its members.
14. Noted: Section 2(9) of the Income-tax Act, 1922 defines a person to include a Hindu undivided family. Under sections 3 and 55, a Hindu undivided family is a taxable unit for income-tax and super-tax.
15. Noted: The Act uses the expression in these and other provisions but does not define it. The reason is that the expression has a well-known meaning in Hindu law, and the legislature did not want to define it again.
16. Held: The expression Hindu undivided family must be understood in the sense it has under Hindu law.
17. Held: There is no substance in the respondent's argument that, without an antecedent history of jointness, the appellant cannot form a joint Hindu family with his wife and unmarried daughter. Such a lack of history was never pleaded, and the record does not support it.
18. Why: Such an assumption ignores that "the joint and undivided family is the normal condition of Hindu society".
19. Noted: The presumption is that the members of a Hindu family live in union, unless the contrary is established. The presumption (a rule that stands unless disproved) may be weaker the farther one goes from the founder of the family. Generally, the normal state of every Hindu family is joint, and without proof of division the legal presumption is jointness.
20. Noted: A man who separates from his father or brothers may still remain joint with the members of his own branch. He becomes head of a new joint family if he has a family. Property he obtains on partition becomes ancestral property of his branch, as regards him and his male issue.
21. Held: The appellant cannot form a coparcenary (the narrower group of those who take a birth-right in joint property) with his wife and unmarried daughter. But the taxable unit under the Act is a Hindu undivided family, not a coparcenary. "A Hindu coparcenary is a much narrower body than the joint family."
22. Noted: A coparcenary includes only persons who acquire an interest in the joint property by birth. These are the sons, grandsons and great-grandsons of the holder of the joint property for the time being, that is, three generations in unbroken male descent.
23. Noted: Under Mitakshara law the birth-right is vested in male issue only. Females come in only as heirs to obstructed heritage (sapratibandha daya), so they cannot be coparceners.
24. Noted: The question here is only whether the wife and unmarried daughter can be members with the appellant of a Hindu undivided family. It is not whether they can be members of a coparcenary.
25. Noted: Sir George Rankin, for the Judicial Committee in Kalyanji's case, said it was a mistake in method to begin by pasting the words Hindu co-parcenary over the wider phrase of the Act. The phrase covers all schools of Hindu law, and the Act does not say on its face that no female can be a member.
26. Noted: Outside the limits of coparcenary there is a fringe of persons, male and female, who form an undivided or joint family. There is no limit to their number, their remoteness from the common ancestor or their relationship with one another.
27. Noted: A joint Hindu family consists of persons lineally descended from a common ancestor. It includes their wives and unmarried daughters. A daughter, on marriage, leaves her father's family and joins her husband's.
28. Noted: The joint Hindu family is a larger body of persons united by the tie of sapindaship (blood relationship by birth, marriage or adoption). The Court quoted the view that sapindaship is the fundamental principle of the Hindu joint family and is of its very essence.
29. Held: "The joint Hindu family, with all its incidents, is thus a creature of law and cannot be created by act of parties". The only exception is that a stranger may be affiliated to the family by adoption.
30. Held: The absence of an antecedent history of jointness is no impediment to the appellant, his wife and unmarried daughter forming a joint Hindu family.
31. Why: The wife became his sapinda on marriage. The daughter became a sapinda on her birth, and remains bound to the family of her birth until she leaves by marriage.
32. Noted: The Court quoted Golapchandra Sarkar Sastri's Hindu Law (Eighth Edition, p. 240): those called by nature to live together continue to do so. They form a joint Hindu family.
33. Held: The appellant is not by contract seeking to bring into his family strangers who are not bound by sapindaship. His wife and unmarried daughter are already members. He is not making them so by agreement.
34. Held: As a Hindu male, the appellant can himself be the stock of a fresh descent (the root from which a new family line starts). So he can form an undivided family with his wife and daughter.
35. Noted: In Gowli Buddanna v. Commissioner of Income-tax, Mysore, Bangalore, Buddappa, his wife, two unmarried daughters and adopted son Buddanna were a Hindu undivided family. On Buddappa's death the question was whether the adopted son, the sole surviving coparcener, could form a joint family with his mother and sisters and be assessed as manager.
36. Noted: Shah, J. said in that case that the plea that two male members are needed has no force. The Income-tax Act uses the expression in the sense of Hindu personal law. Under that law a joint family may consist of a single male member and widows of deceased male members. The Act does not require two male members.
37. Noted: In N.V. Narendranath v. Commissioner of Wealth-tax, Andhra Pradesh, Hyderabad, the appellant claimed Hindu undivided family status for himself, his wife and two minor daughters. The wealth was ancestral property he got on partition with his father and brothers.
38. Noted: The High Court there held the assets were his as an individual because the family had no other male coparcener. This Court set that aside. A joint Hindu family can consist of a single male, his wife and daughters, and two male members are not needed.
39. Held: In both cases the assessee came from a pre-existing joint family. Yet the decisions did not rest on any antecedent history of jointness.
40. Why: In Gowli Buddanna the alternative argument was independent of any pre-existing family. The Court held in categorical terms that the family as an assessable entity need not have two male members. The same is true of Narendranath.
41. Held: The Department's argument that the appellant cannot form a Hindu undivided family without a pre-existing joint family must fail. The High Court's view that he has no son and therefore no undivided family is plainly unsound and is rejected.
42. Held: The question of assessing the income of Kathoke Lodge must be decided on the basis that the appellant, his wife and unmarried daughter are members of a Hindu undivided family.
43. Noted: By the declaration of 26 January 1956 the appellant threw Kathoke Lodge into the family hotchpot, giving up all separate claims. The Tribunal accepted the declaration as genuine. The High Court also decided on that footing, saying the property after the declaration would be property of a Hindu undivided family.
44. Noted: The Department's counsel tried to raise a new contention. He said Hindu law has no such thing as impressing separate property with joint family character. The only doctrine is the doctrine of blending (voluntarily merging separate property into the joint stock). Since the hotchpot was empty, he said, there was nothing to blend with.
45. Noted: The appellant's counsel cited several High Court decisions against this. The Court did not rule on its merits.
46. Held: The contention is not open to the Department. It was not raised before the Tribunal. The Commissioner himself asked for the reference, and the question he asked did not cover this point.
47. Why: In the High Court the Department raised the argument that blending needs both a coparcenary and coparcenary property. Its counsel, after some discussion, did not press it. That was not a concession on a question of law. It was a decision not to press the point.
48. Held: The Department cannot take before this Court a contention that does not arise out of the reference and that its counsel raised but did not press in the High Court.
49. Held: Two points are now clear. The appellant constituted a Hindu undivided family with his wife and unmarried daughter. Kathoke Lodge, his separate property, was thrown by him into the family hotchpot.
50. Noted: What remains is whether the income is assessed in his hands as an individual or as manager of the Hindu undivided family.
51. Noted: The High Court's conclusion rested wholly on Kalyanji's case. That case also loomed large in the arguments, so the Court examined it closely.
52. Noted: In Kalyanji's case, Sicka had two sons, Moolji and Purshottom. Moolji had two sons, Kanji and Sewdas, by his first wife. Both were married. Neither had a son.
53. Noted: Moolji had a son, Mohan Das, by his second wife. Kanji had a wife and a daughter. Sewdas had a wife but no issue. Purshottom had a wife, a son and a daughter.
54. Noted: Moolji, Kanji and Sewdas separated from one another in about 1919. In the same year Moolji gifted capital to Kanji and Sewdas. Moolji kept living jointly with his second wife and Mohan Das.
55. Noted: There was another family headed by Vithaldas. He had three sons: Kalyanji, Chaturbhuj and Champsi. Kalyanji had a wife, three sons and a daughter. Chaturbhuj had a wife and daughters.
56. Noted: In 1912 Moolji and Purshottom, already separate from each other, started a business, Moolji Sicka and Company. Kalyanji, Vithaldas's son, was their partner.
57. Noted: The three partners put their self-acquired property into the business. Later Kanji, Sewdas, Chaturbhuj and Champsi joined. By 1930 there were seven partners.
58. Noted: Kanji and Sewdas got their firm interest as a gift from their father Moolji. Chaturbhuj got his as a gift from his brother Kalyanji. The partners with separate-property interests were not shown to have thrown that property or its receipts into the common stock.
59. Noted: Six appeals went to the Privy Council, for all partners except Champsi. They related to the assessment year 1931-32. The dispute was whether each partner should be assessed to super-tax on his share as an individual or whether the six shares were income of Hindu undivided families.
60. Noted: Moolji, Purshottom and Kalyanji were each members of a Hindu undivided family and each had a son or sons not divided from him. But the firm income was their separate, self-acquired property, not thrown into the common stock. The Privy Council held it was not joint family income.
61. Noted: Chaturbhuj had no son. His interest came from his brother, so the income was self-acquired. The Privy Council said that even a son of his would have taken no birth-right in that income.
62. Noted: The Privy Council said the result for these four partners was not affected by a wife or daughter. If the existence of a son does not make a father's self-acquired property joint, a wife or daughter cannot do so.
63. Noted: For Kanji and Sewdas the gift from their father was assumed, without decision, to be ancestral property in their hands. A son would then have taken an interest by birth. But neither had a son.
64. Noted: The Privy Council held that a wife and daughter may be entitled to maintenance out of separate or joint property. But their existence did not make ancestral property joint.
65. Noted: The decision rested on three crucial facts.
    (i) For Moolji, Purshottom and Kalyanji, the firm income was separate property not thrown into the common stock.
    (ii) For Chaturbhuj, the lack of a son was irrelevant. His interest was self-acquired.
    (iii) For Kanji and Sewdas, even if the interest was ancestral, the income was separate. Neither had a son who could take an interest by birth.
66. Noted: The six appeals fall into two classes. Those of Moolji, Purshottom, Kalyanji and Chaturbhuj are one class. Those of Kanji and Sewdas are the other.
67. Held: The point of distinction between the first four and the appellant is not that they had sons and he has none.
68. Why: Moolji, Purshottom and Kalyanji headed families with sons, yet their income was separate and not thrown into the common stock. The mere existence of a son does not make a father's separate property joint. Chaturbhuj's lack of a son did not put him on par with the appellant, since his interest was never thrown into the common stock. If sons did not make property joint, a wife or daughter could not.
69. Held: Kathoke Lodge, unlike the property of those four, was once separate and was thrown by the appellant into the common stock. The cases of Kanji and Sewdas furnish a near parallel.
70. Why: They did not need to throw their interest into the common stock, since it was assumed to be ancestral. Even so, the income was their separate property as neither had a son to take by birth. So even if Kathoke Lodge were an ancestral asset, its income would be the appellant's separate property, as he has no son. Throwing it into the hotchpot could not have more effect than ancestral character.
71. Noted: The appellant's counsel argued the Privy Council was wrong on the income of Kanji and Sewdas, so it should not be followed. This rested on this Court's disapproval of some Privy Council observations in Kalyanji's case.
72. Noted: In Kalyanji's case the Privy Council said the Bombay High Court, in Lakshminarayan's case, arrived too readily at the conclusion that the income was the family's. That case is Commissioner of Income-tax, Bombay v. Gomedalli Lakshminarayan (3 I.T.R. 367).
73. Held: The Privy Council failed to notice a fundamental distinction between Lakshminarayan's case and Kalyanji's case.
74. Why: In Lakshminarayan's case the joint family was a father, his wife, their son and the son's wife. The property was ancestral in the father's hands and the son had a birth-right in it. A subsisting undivided family existed in the father's lifetime. It did not end on his death.
75. Noted: The family continued with the son, his mother and his wife. The only change was that the son became manager instead of the father. The Bombay High Court rightly held the income should be assessed in the son's status as manager, not individually.
76. Noted: On appeal, the Privy Council regarded itself as bound by Kalyanji's case on the words Hindu undivided family in section 55 and held the facts were not materially different. It held that income received by survivorship (passing to the surviving member) by the sole surviving male member can be taxed as his individual income for super-tax under section 55.
77. Held: This Court disapproved the Privy Council's decision in Lakshminarayan's case, and its remarks on the Bombay view in Kalyanji's case, in at least two cases. Those cases are Gowli Buddanna and Narendranath. In Gowli Buddanna it said the distinction between the two cases had a vital bearing and was not given effect.
78. Held: The appellant's counsel is right that the Privy Council's observations on the Bombay view are not good law. The Privy Council's decision in Lakshminarayan's case has itself been disapproved.
79. Held: That does not affect the correctness of Kalyanji's case itself on the nature of the income of the six partners. That part has never been doubted.
80. Why: The error in Lakshminarayan's case was overlooking the factual distinction. So the ratio of Kalyanji's case was wrongly applied to it.
81. Held: The ratio of Kalyanji's case applies to the instant case. The parallel is furnished by Kanji and Sewdas.
82. Why: Their cases are close to the present case for the very reason they were distinguished from Lakshminarayan's case. There the property was ancestral in the father's hands and a subsisting family continued after his death.
83. Noted: Moolji, Purshottom, Kalyanji and Chaturbhuj raised no such question, since their interest was separate and not thrown into the common stock.
84. Noted: Kanji and Sewdas were divided from their father Moolji at least since 1919, when he gifted capital to them. Kanji joined the firm in 1919 and Sewdas in 1930. The dispute concerned 1931-32. The gifted property was not the property of a subsisting Hindu undivided family of Moolji, Kanji and Sewdas. If it were, Lakshminarayan's case would apply.
85. Held: As with Kanji and Sewdas, the property here was not joint family property of a subsisting Hindu undivided family that had devolved on a sole surviving coparcener.
86. Noted: In that other class of cases the view has consistently been that the property of a joint family does not cease to belong to it merely because it is represented by a single coparcener who has an owner's rights. The only exception is the Privy Council decision in Lakshminarayan's case. Arunachalam Chettiar, Gowli Buddanna, Narendranath and the Bombay High Court in Lakshminarayan all fall in that class. They should not be confused with cases like this one, which fall under Kalyanji's rule.
87. Noted: In Attorney General of Ceylon v. A.R. Arunachalam Chettiar, a father and son were a joint Hindu family with females, including the widow of a pre-deceased son. On the son's death in 1934 the father became the sole surviving coparcener. A Ceylon Ordinance exempted from Estate Duty property passing on the death of a member of a Hindu undivided family.
88. Noted: The Privy Council held the father died a member of the same undivided family as his son. Its continuity was preserved after his death by adoptions made by the widows who were members of the family.
89. Noted: In Gowli Buddanna the father was assessed during his lifetime as manager of the Hindu undivided family. After his death the adopted son claimed individual assessment. The claim was rejected at all stages. This Court held that family property does not cease to belong to the family because the coparcenary is temporarily reduced to one person with an owner's rights.
90. Noted: Narendranath took a similar view under the Wealth Tax Act. His family at the time was his wife and two minor daughters. The wealth was ancestral property received on partition with his father and brothers, so his status was that of a Hindu undivided family, not an individual.
91. Noted: In Narendranath this Court distinguished two classes of cases about ancestral property held by an assessee. In the first, property not originally joint is received by the assessee, and the question is whether it has acquired joint family character in his hands. In the second, property already joint comes to him as a single coparcener, and the question is whether it keeps that character or becomes his absolute property.
92. Noted: This Court there added that different considerations apply where property already impressed with joint family character comes to a single coparcener. The question is whether it retains that character or sheds it. It concluded that the case fell within the rule in Gowli Buddanna.
93. Held: There are two classes of cases, each needing a different approach.
94. Held: In the first class, under Gowli Buddanna, the question is whether property of a subsisting undivided family ceases to be joint merely because the family is represented by a sole surviving coparcener with an owner's rights.
95. Noted: The same question arises where the family consists, for the time being, of widows of deceased coparceners. An example is Commissioner of Income-tax, Madras v. Rm. Ar. Ar. Veerappa Chettiar. It applies so long as the original joint family property stays with the widows and is not divided among them.
96. Held: In the second class, under Kalyanji's rule, the question is whether property that did not belong to a subsisting undivided family has truly acquired joint family character in the assessee's hands.
97. Held: In the second class the composition of the family is a matter of great relevance. A joint Hindu family may consist of a man, his wife and daughter. But their mere existence will not justify assessing the income of joint family property in the status of the head as manager.
98. Held: The appellant's case falls within Kalyanji's rule. The property, before it came to him, was not impressed with joint family character. It is of great relevance that he has no son and his joint family consists, for the time being, of himself, his wife and daughter.
99. Noted: Once the two classes are seen, the apparently conflicting tests are easy to understand. The Court quoted the Privy Council in Kalyanji's case.
100. Noted: In Kalyanji's case the Privy Council said that ancestral property may be called family property in an extra-legal sense. But it does not follow that, in Hindu law, it belongs to the family rather than the individual. If the personal law regards him as owner and the income as his, it is taxable as an individual's income. Holding that a man's inherited property belongs to a Hindu undivided family because he has a wife and daughters would not accord with the Mitakshara.
101. Noted: In Arunachalam's case, which falls under Gowli Buddanna, the Privy Council said the sole surviving coparcener may be the owner. Even so, what he owns is joint family property. On adoption of a son it takes a different quality. Female members have a right to maintenance from it and sometimes a charge on it. These incidents arise because the property has not ceased to be joint.
102. Noted: The Privy Council there held it irrelevant that a single coparcener can alienate in ways not open to one of several. The power to alienate joint family property does not change what it is until he alienates it. It said that the fatal flaw in the argument was labelling him owner and then giving him so many rights that the property could no longer be called joint. It said ownership must be understood by analysing the rights of the family members, living and yet to be born.
103. Held: These two sets of tests govern two distinct sets of cases. There is no inconsistency between them. The test from Kalyanji's case, not from Arunachalam's or Gowli Buddanna's case, applies here.
104. Held: Kathoke Lodge was not an asset of a pre-existing joint family of which the appellant was a member. It became joint family property for the first time when he threw his separate property into the hotchpot.
105. Why: His wife and unmarried daughter could be maintained from its income while it was his separate property. Their rights are not enlarged by the throwing in. They are not coparceners. So they have no birth-right, no right to demand partition and no right to restrain alienation for any purpose.
106. Held: Their prior right of maintenance out of the income stays what it was: "the right of maintenance, neither more nor less."
107. Held: Kathoke Lodge may usefully be described as family property after it was thrown into the common stock. But it does not follow that in Hindu law it belongs to the family, as it would if it had devolved on him as a sole surviving coparcener.
108. Held: Until a son is born, the property is in the eye of Hindu law really his. He can deal with it as full owner, free of legal necessity (a pressing family need that justifies sale) or benefit of the estate. He may sell it, mortgage it or gift it.
109. Noted: The property may change its legal incidents on the birth of a son. Even a son born or adopted after an alienation must take the family hotchpot as he finds it. Such a son has no right to challenge the alienation.
110. Held: The appellant's personal law regards him as owner of Kathoke Lodge and the income as his, even after the throwing in. So the income is chargeable as his individual income, not that of the family.

Authorities

• Kalyanji Vithaldas v. Commissioner of Income-tax (Privy Council, opinion of Sir George Rankin): income of the six partners; Hindu undivided family is not confined to a coparcenary; mere wife and daughter do not make property joint. Followed and applied to the present case. Its remarks on Lakshminarayan's case are not good law.
• Commissioner of Income-tax, Bombay v. Gomedalli Lakshminarayan, 3 I.T.R. 367 (Bombay High Court, Rangnekar, J.): income of ancestral property stayed the joint family's income after the father's death. Held rightly decided. Distinguished from Kalyanji's case.
• Gomedalli Lakshminarayan (Privy Council appeal): income of the sole surviving male taxable as his individual income under section 55. Disapproved by this Court.
• Gowli Buddanna v. Commissioner of Income-tax, Mysore, Bangalore (Shah, J.): two male members are not needed for a Hindu undivided family. Followed. Property of a subsisting family does not lose its joint character when one coparcener remains.
• N.V. Narendranath v. Commissioner of Wealth-tax, Andhra Pradesh, Hyderabad: a family of a man, wife and minor daughters is a Hindu undivided family. It set out the two classes of cases. Followed.
• Attorney General of Ceylon v. A.R. Arunachalam Chettiar and Others (Privy Council): the sole surviving coparcener's property stayed joint family property. Discussed as falling in the Gowli Buddanna class.
• Commissioner of Income-tax, Madras v. Rm. Ar. Ar. Veerappa Chettiar: cited for the rule that property of a family reduced to widows of coparceners keeps its character, while it stays undivided in their hands.
• Golapchandra Sarkar Sastri, Hindu Law (Eighth Edition, p. 240): quoted for the idea that those called by nature to live together form a joint Hindu family.
• Also cited in footnotes: the footnote text is not in the saved judgment. The footnote markers appear after the passages on joint family property, the meaning of Hindu undivided family, the presumption of union, sapindaship, Gowli Buddanna, Narendranath, Lakshminarayan's case and Veerappa Chettiar.

Provisions

• Section 2(9), Income-tax Act, 1922: defines person to include a Hindu undivided family.
• Sections 3 and 55, Income-tax Act, 1922: make a Hindu undivided family a taxable unit for income-tax and super-tax.
• Section 66(1), Income-tax Act, 1922: the Tribunal referred the question of law to the High Court under it.

Judgement

1. The appeal is dismissed.
2. There is no order as to costs.
3. The appellant, his wife and unmarried daughter form a Hindu undivided family.
4. The income of Kathoke Lodge is chargeable to income-tax as the appellant's individual income, not as the income of the family.

Legal Principle / Ratio

A single male can form a Hindu undivided family with his wife and unmarried daughter, even with no son and no earlier history of jointness. But when property that was not joint is thrown into the family hotchpot, the composition of the family is of great relevance. A wife and daughter alone do not justify assessing the income in the head's status as manager. With no son, the owner keeps full ownership.

Key holding: "Since the personal law of the appellant regards him as the owner of Kathoke Lodge and the income therefrom as his income".

Critical Analysis

Analysis based on the judgment text.

• The Court accepts that the appellant and his wife and daughter form a Hindu undivided family. Yet it taxes the rent as his own. The result depends on his full ownership under personal law, not on family status.
• The Court did not decide whether Hindu law allows impressing separate property with joint character. It held this contention was not open to the Department.
• The Court says the property may change its legal incidents on the birth of a son. It does not say what the tax position would be after that.
• The Court rejected the argument that Kalyanji's case was wrong on Kanji and Sewdas. It held that part of that case never doubted and open to no exception.

Significance

• The case confirms that a Hindu undivided family under the Income-tax Act is wider than a coparcenary.
• It confirms that one male, with his wife and unmarried daughter, can form such a family.
• It explains the two classes of cases: property of a subsisting family, and property first thrown into the hotchpot.
• It shows that family status alone does not make the income taxable in the family's hands.
• It is read with the notes on joint family and coparcenary, and with State Bank of India v. Ghamandi Ram (1969).

Exam-Important Points

• Rule: a joint Hindu family can be one male, his wife and unmarried daughter. Trap: they are not a coparcenary.
• Rule: a daughter is a sapinda by birth until she marries. Trap: she has no birth-right in the property.
• Rule: Hindu undivided family under the Act means the Hindu-law meaning. Trap: it does not need two male members.
• Rule: property of a subsisting joint family stays joint with a sole surviving coparcener (Gowli Buddanna class). Trap: a thrown-in property of a sonless man is not in this class.
• Rule: for thrown-in separate property, composition of the family matters (Kalyanji class). Trap: a wife and daughter do not make the income the family's.
• Rule: a point raised but not pressed in the High Court, and outside the reference, cannot be raised in the Supreme Court.
• Result: appeal dismissed, no costs. The family exists, but the income is individual.

Prepared from the full text of the judgment. This judgment has no numbered paragraphs, so no paragraph numbers are cited.