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PETITIONER: COMMISSIONER OF INCOME-TAX, ASSAM

       Vs.

RESPONDENT: NANDLAL AGGARWAL & ANR.

DATE OF JUDGMENT: 17/11/1965

BENCH: RAMASWAMI, V. BENCH: RAMASWAMI, V. SIKRI, S.M. SUBBARAO, K. SHAH, J.C. SIKRI, S.M. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. SATYANARAYANARAJU, P.

CITATION:  1966 AIR  902            1966 SCR  (2) 918

ACT:     Indian Income-tax Act (11 of 1922), s. 40--Two guardians appointed   for  two  minors--Hindu  undivided   family   or individual, assessment.

HEADNOTE:      The two respondents were appointed guardians of the two minor  .sons after the death of their father and mother,  by an order of the Civil Court.  Prior to his death the  income of the father’s business was assessed as an individual.  The guardians  filed  a return on behalf of the  minors  in  the status  of  a joint Hindu family.   The  Income-Tax  Officer assessed the guardians under s. 23(3) read with s. 41 of the Income-tax Act.  Later the Court allowed the guardians toll separate  accounts thereafter for each of the  minors.   The Appellate  Assistant  Commissioner, on  appeal  against  the assessment, directed their separate individual  assessments, which was set aside by the Tribunal.  On reference, the High Court held against the Revenue.  In this Court, the  Revenue contended  that  under s. 40 of the Act the  guardians  were liable to pay tax as it would be leviable from minors if  of full age, and if the minors had been of full age they  would be assessed as Hindu undivided family.       HELD : Section 40 of the Act applied to this case, and consequently  the guardians ought to be  assessed,  treating the minors as constituting a Hindu undivided family. [616 H]       On the death of the father, the minor sons constituted a  joint  Hindu  family and the business  was  joint  family property.   Till  some  positive  action  was  taken  to   a partition  of  the property, it would  remain  joint  family property.  The order appointing the two guardians could  not be read as having effected partition of the property.  Apart from the fact that the Court under the Guardianship Act  has no  jurisdiction to partition property belonging to a  join" Hindu  family, there are no words in the order of the  Court appointing the guardians to warrant such a finding. [616 E]

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      The court’s order allowing the guardians to keep  and submit  separate  accounts  came into  existence  after  the assessment year and after the Income-tax Officer had  passed his  order.  Therefore it could not have any effect  on  the position  prevailing  in  the relevant  accounting  year  in dispute. [616 D]     Srifudin  Alimohammad v. Commissioner of Income-tax,  25 I.T.R. 237, referred to.     Commissioner   of  Income-tax  v.  Balvantrai   Jethalal Vaidya, 34 I.T.R. 187, approved.

JUDGMENT:     CIVIL APPELLATE JURISDICTION : Civil Appeal No. 820 of 1964. Appeal from the order dated July 4, 1961 of the Assam High Court in Income-tax Reference No. 1 of 1961. 613     S.V. Gupte, Solicitor-General, N. D. Karkhanis, B. R. G. K. Achar and R. N. Sachthey, for the appellant.     A.  V.  Viswantha Sastri and D. N.  Mukherjee,  for  the respondents.     The Judgment of the Court was delivered by     Sikri,  J.  This appeal in pursuance  of  a  certificate granted under s. 66A(2) of the Indian Income Tax Act,  1922, hereinafter referred to as the Act, is directed against  the judgment  of the High Court of Assam in a reference made  to it  under s. 66(2) of the Act.  The question referred to  by the  Appellate Tribunal was   "whether  in the circumstances of  the  case the Tribunal was justified  in  assessing  the income  of the minors in the hands of the guardians  as  the income of a Hindu undivided family."      The relevant facts out of which the reference arose are as  follows  : Shri Kishanlal Agarwalla  died  intestate  in December 1950, leaving his widow and two minors, Basanta and Ashok.   Prior  to  his death he was being  assessed  as  an individual  on the income arising from the business  carried on  in the name of Shri Krishan Rice Mills, Tezpur.  He  was governed  by Mitakshra School of Hindu Law.  The widow  also died in 1952.  On the death of the widow an application  was made by Shri Nandlal Agarwalla to the Court of the  District Judge,  Gauhati,  for being appointed as a guardian  of  the person  and  the properties of the two minors,  Basanta  and Ashok.  The District Judge, by his order dated June 1, 1953, appointed  him  temporarily the guardian of the  person  and properties  of Basanta and Ashok, till the disposal  of  the application,  and  transferred the file to  the  Subordinate Judge, L.A.D., Nowgong.  On December 15, 1953, the Sub-Judge appointed  Shri  Dwarka Prasad Agarwalla  and  Shri  Nandlal Agarwalla guardians of the person and properties (as per the schedule  in  the application) of Basanta  and  Ashok.   The guardians  were directed to render accounts half  yearly  in the  months  of March and September each year, i.e.  by  the 31st  March and 30th September, each year until  the  minors attained majority.      It  is  not necessary to mention what happened  in  the assessment  years  1951-52,  1952-53  and  1953-54   because nothing  turns  on that.  For the assessment  year  1954-55, which  is the subjectmatter of this reference, a return  was filed  in  the  status of a Joint Hindu Family  by  the  two guardians.      It  appears  that  on March 25,  1958,  the  Sub-Judge, Nowgong, passed the, following order Sup.C.I/66--9

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614               "Account upto 30th September, 1957 filed.  The               guardians file petition seaking permission for               showing   the  accounts  of  the  two   minors               separately.               Heard  learned  lawyer.   The  guardians   are               hereby  allowed  to keep and  submit  separate               accounts  henceforward for each of the  minors               together with accounts of profits and loss and               separate expenses of each minor." It  seems  to  have been assumed that this  order  was  also operative  during  the accounting year 1953-54,  but  it  is clear that this order has no application to this  accounting year.       The Income Tax Officer, by his order dated October 19, 1957, assessed the guardians under s. 23 (3) read with s. 41 of  the  Act.   The guardians filed  an  appeal  before  the Appellate   Assistant  Commissioner  contending   that   the assessment   was  bad  in  law.   The  Appellate   Assistant Commissioner by his order dated May 16, 1956, set aside  the assessment  and directed the Income Tax-Officer to  reassess after obtaining two separate returns from the appellants and to  frame two separate individual assessments.  He  came  to the  conclusion that "the very fact that separate  guardians for  the  two  minors  were  appointed  by  the  Court  with directions to separately account for their accounts and  the expenses  clearly establishes that they cannot also form  an H.U.F."  By the time this order was passed,  the  Sub-Judge, Nowgong,  had passed the order dated March 25, 1958, and  it is clear that the Appellate Assistant Commissioner relied on it.   He further held that "the two minors should  be  taxed through  the Guardians in their individual share of  profits at the rate applicable to the individual incomes.  For  that purpose  the total income should be computed as it  has  now been  done.  Two separate assessments should be made in  the names  of  two minors at the hands of the guardians  in  the status  of  individual.   I  may note  here  that  even  the deceased father was assessed in the status of an  individual and not in any way as an H.U.F."      The  Income  Tax  Officer filed an  appeal  before  the Income Tax Appellate Tribunal and the Tribunal set aside the order  of the Appellate Assistant Commissioner and  restored the  order of the Income Tax Officer with  the  modification that the status of the assessee must be described as  H.U.F. The  Appellate  Tribunal  held that the status  of  the  two minors  is  only that of H.U.F., as it  existed  before  the curatorship proceedings, and must continue to be so till  at least such time that the elder minor attains majority. 615 The guardians put in an application dated December 8,  1958, before  the Appellate Tribunal under s. 35 complaining  that the contention of the guardians that under the Hindu Law, by which the minors are governed, their shares are specific and determinate and they can only be assessed under s. 41 in the manner and to the extent the assessment can be made on  each of the two minor children individually on whose behalf  such income was receivable by the guardians had not been adverted to.   The  Appellate  Tribunal, however,  replied  that  the contention  referred to in the application had been  omitted to  be dealt with in the order of the Tribunal as it  became academic  in the light of the Tribunal’s decision  that  the assessee  was a H.U.F. The Tribunal refused to state a  case under s. 66(1) of the Act, but on being directed to do so by the Assam High Court, it drew up a statement of-the case and referred  the  question  set  out  above.   The  High  Court

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answered the question in the negative.  The High Court  held that  the guardians "received the shares of these minors  in the profit of the business as their income.  By the order of the  Court, separate accounts in the name of the two  minors were  opened in which the receipts and expenses relating  to each of the minors were separately adjusted.  The  guardians were  thus only liable to pay tax on the amount  which  they received  on  behalf  of these two  minors  separately.   It cannot  be  said that they were appointed guardians  of  any joint  family  as such, so that their  beneficiary  was  the joint family as such and thus they were liable to pay tax on the  total  income received by them on behalf of  the  Hindu undivided  family, their ward.  The beneficiaries  were  the two  minors separately, The two minors are the wards of  the guardians.  The guardians will, in our opinion, be liable to pay tax on the separate income of each of the minors."      The learned Solicitor-General who appears on behalf  of the  Revenue  contends that under s. 40 the  guardians  were liable  to pay tax in like manner and to the same amount  as it would be leviable upon and recoverable from the minors if of  full age.  He says that if the minors had been  of  full age,  they would have been assessed as a H.U.F. Mr.  Sastri, the  learned counsel for the respondents, contends that  the minors  would not have been assessed as a H.U.F.  but  would have  been assessed individually on their separate  incomes. He  says that under s. 7 of the Guardians and Wards Act,  no guardian  could  have  been  appointed  in  respect  of  the undivided interest of a minor and, therefore, the Court must have  proceeded  on the basis that the properties  had  been divided  among the minors.  He further points to  the  order dated 616 March  25,1958, which shows that the interest of the  minors was separate.     It is not necessary to decide the question whether under the Guardianship Act a guardian could have been appointed in respect  of the undivided interest of the minors.  There  is authority for the proposition that when all the co-parceners are  minors,  a  guardian can be  appointed  for  the  whole number.  (see Bindaj Lusuman Triputikar v. Mathurabai)  (1), and  Mayne’s  Hindu  Law (para 230, page  285).   The  point whether  the appointment of guardians was valid or  not  has not  been  raised before the Income Tax authorities  and  we must  proceed on the basis that the appointment  was  valid. Both  the  Revenue and the respondents have  acted  on  this assumption.   The only question which can be raised  is  the effect  of the orders dated June 1, 1953, December 15,  1953 and  March 25, 1958, on which Mr. Sastri strongly relies  to establish  that  the minors had individual incomes.   As  we have  already stated, the order dated March 25,  1958,  came into  existence  after  the assessment year  and  after  the Income  Tax  Officer  had  passed  his  order.   It  cannot, therefore, have any effect on the position prevailing in the accounting year 1953-54.      We  have  already  mentioned that  Shri  Kishanlal  was governed by the Mitakshra School of Hindu Law and it appears to  us  that  on his death his widow, and  two  minor  sons, Basanta and Ashok, constituted a joint Hindu family and  the business  was  joint family property.   Till  some  positive action  was  taken to have a partition of the  property,  it would  remain  joint family property.  We  cannot  read  the order dated December 15, 1953, of the Sub-Judge, Nowgong, as having  effected partition of the property.  Apart from  the fact  that  the  Court under the  Guardianship  Act  has  no jurisdiction  to  partition property belonging  to  a  joint

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Hindu family there are no words in the order to warrant such a finding.       Reference   was  made  to  Saifudin   Alimohammed   v. Commissioner of Income Tax(2) and Commissioner of Income Tax v.  Balwantrai Jethalal Vaidya(3).  We agree with  the  view expressed  by Chagla, C.J., in the latter case in  which  he explained certain observations made in the former case.   If a  guardian  carries  on business on behalf  of  minors  and receives  income on their behalf, S. 40 of the Act  must  be applied.        In our opinion S. 40 plainly applies to the facts  of this  case  and  consequently  the  guardians  have  to   be assessed, treating the (1)  I. L. R. 30 Bombay 152. (3)  34 I. T. R .1 87. (2)  25 I. T. R. 237, 617 minors as constituting a H.U.F. In the result the appeal  is accepted  and  the question referred to the  High  Court  is answered  in the affirmative.  The appellant will  have  his costs here and in the High Court.                                    Appeal allowed. 618