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PETITIONER: C.I.T. BIHAR & ORISSA, PATNA

       Vs.

RESPONDENT: MAHARAJ KUMAR KAML SINGH

DATE OF JUDGMENT13/02/1973

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. REDDY, P. JAGANMOHAN KHANNA, HANS RAJ

CITATION:  1973 AIR 1056            1973 SCR  (3) 522  1973 SCC  (3) 819

ACT: Indian  Income-Tax  Act,  1922, ss.  16(3)  (a)  (a)  (iii), 9(4)(a)-Holder of impartible estate, transferring properties of estate to his wife-Income from properties whether  liable to  be included in income of assessee-Fiction created by  s. 9(4)(a) renders assessee liable under s. 16(3) (a) (iii).

HEADNOTE: The  assessee-respondent  is  the holder  of  an  impartible estate.   By  an  indenture dated 23rd  November,  1963,  he granted  to  his  wife  two premises  for  life  by  way  of supplementary maintenance grant.  It was a direct  transfer which was admittedly  not effected for any consideration or in  connection with the agreement to live apart. During  the assessment years 1957-58  to  1960-61,  the  income  from these  house properties  was included in the total  income of the assessee under section16(3) (a) (iii) of the Act  At the instance of the assessee the matter was referred to  the High Court.  TWO questions fell for consideration before the High  Court, namely, (i) whether the Tribunal was  justified in  holding that the provisions of s. 16(3)(1)(iii)  applied to the income arising from the property; and (ii)whether the Tribunal was right in holding that the income under the said provisions  was to be included in the total income  for  the purpose of computing the net annual value of the residential house,  under the first proviso of s. 9(2).  The High  Court answered  the  first of the two questions in favour  of  the assessee  and, therefore, did not think it necessary  to  go into  the other question.. On appeal by certificate to  this Court, the material question was whether the income from the house  properties transferred by the assessee was liable  to be included the income of  the assessee. HELD : (i) The incident of impartible estate have been  well settled  by the decisions of the Courts in this  country  as well  as  by the decisions of the judicial  committee.   The holder  of  an impartible estate has uncontrolled  power  of enjoyment  and disposal of the impartible estate as well  as the income arising therefrom; yet the estate belongs to  the Hindu joint family of which the holder is a member.  Subject to any custom to the contrary, on the death of the holder of an  impartible estate, the estate devolves by  survivorship.

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[524G-H] Baijnath  Prasad  Singh and Ors. v. Tej Bali, L.R.  48  I.A. 195,  Shiba Prasad Singh v. Rani Proyad Kumari Devi &  Ors., L.R.  59  I.A. 331 and Commissioner of  Income-tax,  Punjab, North-West  Frontier  and Delhi Provinces, Lahore  v.  Dewan Bahadur  Dewan Krishna Kishore, Rais, Lahore, 68  I.A.  155, referred to. (ii)After  s. 9 was amended by incorporating s.. 9(4),  the income  of  house  property  owned  by  the  holder  of   an impartible  estate  has to be considered as  his  individual income.   From  this it follows-that had  the  assessee  not transferred the premises in question in favour of his  wife, the income from those premises would have been considered as his  individual income under section 9. The contention  that s. 9(4) (a) raises a legal fiction which is limited for  the purpose  of s. 9 is fallacious.  Section 9 deals  with  only one head of income.  Section 9(4) (a) speaks for the purpose of  this  Section"  which really means for  the  purpose  of deter-                             523 mining  the taxable income of the assessee.  An assessee  is not separately taxed under each head of income., Hence  when a source of income is transferred from assessee to his  wife excepting  for  the two purposes mentioned in s.  16(3)  (a) (ii),  income from that purpose has to be considered as  the income  of  the assessee because of asset  of  the  assessee stands transferred to his wife.  Such a conclusion does  not amount  to extending the fiction created under s.  9  beyond the  purpose  for  which it is, created.   It  merely  gives effect to that fiction.  It is true that a legal fiction may not  be extended beyond the purpose for which it is  created but that does not mean that the Court should not give effect to that fiction. [526H to 527D] Section  27(ii) of the Income-tax Act, 1961 which has  taken place of s. 9(4) of the Act makes explicit that was implicit in the provision, as it originally stood. [527D-E] (iii)It follows as necessary corollary that the  annual value of the assessee’s residential house has to be computed at  10%  of the total income of the  assessee  which  income includes the income from the house properthis transferred to his wife as required by the first proviso to s. 9(2). [527E- G]

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 297 to 300 of 1970. Appeal  by  Certificate from the Judgment  and  order  dated August  9, 1966 of the Patna High Court in  Misc.   Judicial Cases Nos. 480 to 483 of 1964. V.  S. Desai, J. R. Murthy, S. P. Nayar and R. N.  Sachthey, for the appellant. N.D.  Karkhanis, Santokh Singh, and U. P. Singh, for  the respondent. The Judgment of the Court was delivered by HEGDE, J. These are appeals by certificate.  They arise from a common judgment delivered by the High Court of Patna. The  assessee  respondent  is the holder  of  an  impartible estate.  By an indenture dated November 23, 1950, he granted to his wife two premises at Camac Street, Calcutta for  life by  way  of  supplementary  Khorposh  (maintenance)   grant. During the assessment years with which/we are concerned viz. 1957-58  to 1960-61, the income from those house  properties was  included in the total income of the assessee  under  S.

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16(3)  (a) (iii) of the Indian Income-tax Act, 1922  (to  be hereinafter   referred  to  as  the  Act).    The   assessee challenged  the  validity of that inclusion firstly  on  the ground  that s. 1 6 (3) (a) (iii) of the Act is ultra  vires Art. 14 of the Constitution and secondly on the ground  that the  income in question cannot be considered as  his  income for the purpose of the said section.  These objections  were over-ruled by the authorities under the Act.  Thereafter  at the instance of the assessee, the following three question,% were referred to, the High Court of Patna under s. 66 1 ) of the Act. L96SupCI/73 524               "(1)  Whether the provisions of S.  16(3)  (a)               (iii)  of the Indian Income-tax Act, 1922  are               ultra vires the Constitution of India ?               (2)   Whether  in the facts and  circumstances               of  the  case the Tribunal  was  justified  in               holding that the provisions of section 1 6  (3               ) (a) (iii) applied to the income arising from               a  property  transferred by the holder  of  an               impartible   estate  to  his  wife   for   her               maintenance ?               (3)   Whether  in the facts and  circumstances               the  Tribunal  was right in holding  that  the               income  under section 16 (3) (a) (iii) was  to               be  included  in  the  total  income  for  the               purpose  of computing the net annual value  of               the  residential  house at 10%  of  the  total               income  under the 1st Proviso to section  9(2)               ?" Before the High Court Counsel for the assessee did not press for  any answer on the first question evidently in  view  of the decision of this Court in Balaji v. Income-Tax  Officer, Special Investigation Circle, A kola and ors. (1) The second question was answered in favour of the assessee and in  view of the decision of the High Court on that question, the High Court  did  not  think it necessary to  go  into  the  third question.   The  answer to the  third  question  necessarily depends on the answer to the second question.  If we come to the  conclusion that the second question was  not  correctly answered then it follows that the income from the properties in  question has to be included in the total income  of  the assessee  and the income from, the residential house of  the assessee  will  have  to be computed at 10%  of  his.  total income  under the 1st proviso to s. 9(2) of the Act.   Hence the  material question to be decided is whether  the  income from the properties in Calcutta is liable to be included  in the income of the assessee. The  assessee  is assessed as an individual.   As  mentioned earlier,  he  is the holder of an  impartible  estate.   The incidents of impartible estate have been well settled by the decisions  of  courts  in this country as  well  as  by  the decisions  of  the  Judicial Committee.  The  holder  of  an impartible  estate has uncontrolled power of  enjoyment  and disposal  over  the impartible estate as well  as  over  the income arising therefrom; but, yet the estate belongs to the Hindu joint family of which the holder is a member.  Subject to,  any custom to the contrary, on the death of the  holder of   ’an   impartible  estate,  the   estate   devolves   by survivorship see Baijnath Prashad Singh and ors. v. Tej Bali Singh(2) and Shiba Prasad Singh v. (1) 43, I.T.R. 393. (2) L.R. 48 IA. 195. 525

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Rani  Prayad Kumari Debi and ors. (1).  In  Commissioner  of Income-tax, Punjab, North-West Frontier and Delhi Provinces, Lahore  v.  Dewan  Bahadur  Dewan  Krishna  Kishore,   Rais, Lahore(2), the Judicial Committee held that the income of  a house  property  which  is a part of  an  impartible  estate cannot be considered as the individual income of an assessee under  s.  9  of  the Act as it  stood  then.   Therein  the Judicial Committee observed               "Since  the decision of the Board in  Baijnath               Prashad  Singh v. Tej Bali Singh  (supra),  it               has  been  settled law that  property,  though               impartible, may be the, ancestral property  of               a  joint  family, and that in such  cases  the               successor falls to be designated according  to               the   ordinary   rule   of   Mitakshra.    The               concluding words of the judgment, delivered on               behalf  of  the  Board  by  Lord  Dunedin   in               Baijnath’s case (supra) are to that effect and               in that case, as well as in Shiba Prasad Singh               v.  Prayag Kumari Devi (supra) which  followed               it, "the keynote of the whole position" is-not               that  property  which is  not  joint  property               devolves by virtue of custom as though it  had               been joint-but that the general law  regulates               all  beyond  the custom, that  the  custom  of               impartibility  does not touch  the  succession               since   the  right  of  survivorship  is   not               inconsistent with the custom; hence the estate               retains the character of join family  property               and  devolves  by the general  law  upon  that               person who, being in fact and in law joint  in               respect of the estate, is also the senior mem-               ber in the senior line." On  the  basis of the above reasoning their  Lordships  held "for  the  purpose of section 9 of the Act"  the  income  in question  is not the individual income of the holder of  the estate.   After that decision was rendered s. 9 of  the  Act was amended by incorporating s. 9 (4) which reads: "For the purpose of this section-               (a)   the holder of an impartible estate shall               be  deemed to be the individual owner  of  all               the properties comprised in the estate.               (b)             x                            x               x Hence,  it is clear that after s. 9 was amended, the  income of house property owned by a holder of an impartible estable has to be considered as his individual income.  From this it follows  that had the assessee not transferred the  premises in  question  in favour of his wife, the income  from  those premises would have been considered as his individual income under  s.  9.  Now we have to see  whether  because  of  the transfer of the premises in favour. of his (1) L.R. 59 I.A. 331. (2)68 I.A.P. 155. 19-L796Sup.C. I. /73 (2) 68 I.A. p. 155. 526 wife., the said income cannot be considered as the income of the  assessee under s. 16(3) (a) (iii).  Section  16(3)  (a) (iii) reads "In  computing  the total income of any individual  for  the purpose of assessment, there shall be included- (a)  so much of the income of a wife or minor child of  such individual as arises directly or indirectly-      (i)  x    x         x

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    (ii) x    x    x (iii)     from assets transferred directly or indirectly  to the  wife  by  the  husband  otherwise  than  for   adequate consideration  or  in connection with an agreement  to  live apart; or      (iv) x               x             x      (b)  x                x           x There  is  no dispute that the transfer with  which  we  are concerned is a direct transfer.  Further it is admitted that the   transfer  in  question  was  not  effected   for   any consideration adequate or otherwise, nor was it effected  in connection  with  an  agreement  to  live  apart.   But  the assessee’s contention was, which contention was accepted  by the High Court that s. 9 (4) (a) only deems the income of  a house  property  included  in an impartible  estate  as  the individual  income  of  the holder and  that  only  for  the purpose  of  s. 9 and not for any other purpose.   In  other words, it was urged that section raises a legal fiction  and that  legal fiction is limited for the purpose of s.  9.  It was  further urged that a legal fiction cannot  be  extended beyond  the  purpose for it was created.   Counsel  for  the assessee urged that the fiction incorporated in s. 9 (4) (a) can be taken.into consideration only for the purpose of s. 9 and  not  for  the purpose of s. 16  (3).   This  contention appears to us to be fallacious. Section  6 of the Act sets out the various heads of  income, profits  and gains chargeable to income-tax.  They  are  (i) salaries;  (ii)  interest on securities; (iii)  Income  from property; (iv) Profits and Gains of business, profession  or vocation. (v) Income from other sources (vi) Capital  gains. Section  3  read with s. 4 brings to tax the  total  income, profits  and  gains of an assessee from whatever  source  it might  have been received or accrued.  The total  income  is defined  in  s.  2(xv) as meaning total  amount  of  income, profits and gains referred to in sub-s. (1) of s. 4 computed in the manner laid down in the Act. Section 9 deals with only one head of income.  Prior to  the transfer  by  the  assessee,  he, in  law  would  have  been considered  as the owner of those premises for  purposes  of ascertaining his income 527 from  house property and that income would have  been  taken into account in computing his total income.  In other words, in  ascertaining  the total income of the assessee  for  the purpose  of assessment that income also would  have  entered into the ’Calculation.  Hence when s. 9 (4) (a) speaks  "for the purpose of this section" it really means for the purpose of determining the taxable income of the assessee.  It  must be remembered that an assessee is not separately taxed under each  head  of  income.  Hence when a source  of  income  is transferred  by the assessee to his wife, excepting for  the two  purposes mentioned in s. 16 (3) (a) (iii), income  from that  source  has  to be considered as  the  income  of  the assessee because an asset of the assessee stands transferred to,  his  wife.   Such  a  conclusion  does  not  amount  to extending the fiction created under S. 9 beyond the  purpose for  which  it is created.  It merely gives effect  to  that fiction.   It  is true that a legal fiction  should  not  be extended  beyond the purpose; for which it is  created;  but that does not mean that the court should not give effect  to that fiction. Section 27 (ii) of the Income-tax Act, 1961 which has  taken the  place  of s. 9(4) of the Act does not begin  by  saying "for  the purpose of this section".  On the other  hand,  it says  that  "the  holder of an impartible  estate  shall  be

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deemed  to  be the individual owner of  all  the  properties comprised in the estate".  It was contended on behalf of the assessee that this is a change in the law and on that  basis we were asked, to accept the assessee’s construction of s. 9 (4)  (a).  We are unable to accept this contention.   We  do not think that there is any change in tile law.  Section  27 (ii)  of  the Income-tax Act, 1961 makes explicit  what  was implicit in the provision as it originally stood. In  view  of  our conclusion that the income  of  the  house property in question should be included in the total  income of  the assessee, it follows as a necessary  corollary  that the annual value of the assessee’s residential house has  to be computed at 10% of the total income to the assessee which income  as already held included the income from  the  house properties  transferred to his wife as required by  the  1st proviso to s. 9(2). For  the reasons mentioned above, these appeals are  allowed the  answer  given by the High Court to question  No.  2  is vacated  and  in its place we answer that  question  in  the affirmative and in favour of the Revenue.  Our answer to the third  question is also in the affirmative and in favour  of the  Revenue.   The  assessee shall pay  the  costs  of  the Revenue both in this Court and in the High Court. S.B.W.                                Appeal allowed. 628