Property inherited from divided father:
There is a conflict of opinion on the question whether the property inherited from the separated father is ancestral or separate property in the hands of the son.
View of Gujarat High Court:
In Commissioner of Income Tax v. Babubhai Mansukhbhai, 1977 (108) ITR 417 (Guj) A and his son Â partitioned their joint family property. Â and his son Ñ got half of the property at the partition. The other half was allotted to A. A died leaving a widow and his divided son B. A’s property devolved on them. So Â got half of this property.
The question is whether this property would be ancestral or separate property in the hands of B. Prior to the Hindu Succession Act of 1956 it would be obviously ancestral property in B’s hands as it was received by inheritance from his father.
Divan, CJ. Held that there is nothing in the Hindu Succession Act which would be inconsistent with the general Hindu law doctrine and so the property would be only ancestral in B’s hands. Its income could be taxed only as the income of the joint family of Â and his son Ñ and not as the separate income of B.
View of the Madras High Court:
In Additional Commissioner of Income Tax v. P.L. Karuppan, AIR 1979 Mad. 1 (FB) the facts are identical with those of the Gujarat decision mentioned above. Govindan Nair, C.J., has held that the property in such a case is only separate property in the hands of B. The reason is that under s. 8 of the Hindu Succession Act the property of A devolves on the class I heirs.
In class I heirs the Son (B) is mentioned as heir but the son’s son (O is not mentioned. Only a predeceased son’s son is mentioned as class I heir, not a surviving son’s son. So Â excludes C. This is inconsistent with the pre-Act Hindu law rule that “Son” includes “Grandson” and “Great Grandson”.
Hence the rule that in the property inherited by the son from the divided father, the son’s son has a right by birth is overridden by the contrary provision implicit in s. 8 of the Hindu Succession Act. So the property is only separate property in the hands of Â and its income cannot be taxed as the income of the joint family of Â and C.
It is true that the living son’s son is not enumerated, as an heir in the class I heirs. If he is so enumerated, he gets a share in his own right. That is, as grandson, he will get one share and his father will also get one share. But the statutory intention is that his branch (father and son) should get only one share. That is why the pre-deceased son’s son is mentioned as heir. He represents his deceased father. So also the predeceased son’s pre-deceased son’s son takes.
This also is attributable to his representative capacity. Where from does he acquire to his representative capacity? He secures it only from his right by birth. So the right by birth cannot be denied to the living son’s son. No doubt under s. 8, as Class I heir Â takes to the exclusion of his son C. But s. 8 does not say anything about the character of the property in the hands of B. (Whether it is ancestral or separate property).
The fact that the pre-deceased son’s son is recognised as Class I heir suggests rather that the old rule of Hindu law is not abolished and this property continues only as joint family property in the hands of Â as under the Pre-Act law. The view of Divan, C.J. (the Gujarat view) seems to be preferable.
(ii) Blended Property:
It is open to the coparcener to blend his separate property with the ancestral property and thus make it coparcenary property. He is not bound to do so and may keep his self-acquired property for himself. It depends upon his intention whether he has blended it with the coparcenary property or not.
A female member of a Hindu joint family is not a coparcener and so cannot blend her separate property with joint family property. Pushpa Devi v.I.T. Commissioner, AIR 1977 SC 2230. Blending is a unilateral act. The self acquisition of a joint family member is thereby transformed into joint family property. No gift is involved in this process. So an act of blending cannot be taxed, under the Gift Tax Act, 1958. Goli Eswaraiah v. Gift Tax Commissioner, A.Ð., AIR 1970 SC 1722.
(iii) Property Acquired by Utilising Coparcenary Property:
When property is acquired by utilizing the income of coparcenary property, it is itself to be treated as coparcenary property. Thus, if the life of member of a joint family is insured and the premium is paid out of joint family funds, the insurance amount would be coparcenary property. Bengal Insurance Co. v. Vellayamma, ILR 1937 Mad. 990.
Property Inherited from Father:
Devolution under s. 8 of the Hindu Succession Act, 1956:— Rules of Succession to Males:—When the self-acquired property of A devolves on his son Â it becomes under Sastric Hindu law, joint family property in the hands of Â so that his sons become entitled in it to a right by birth.
This law has changed as a result of s. 8 of the Act. Property which a son inherits from his father becomes only his self-acquired property. He inherits it along with his brothers, sisters and mother also. In the hands of his sister or mother it is absolute property.
Similarly in the hands of Â also it is only absolute property, i.e. his self-acquired. Yudhister v. Ashok Kumar, AIR 1988 SC 558; Following Commissioner of Wealth Tax, Kanpur v. Chander Sen, and AIR 1986 SC 1753.
These decisions of the Supreme Court have completely upset the law as it has been understood hitherto in regard to the nature of ancestral property. Property inherited by A from his father is ancestral property in which his son acquires a right by birth.
In other words, A cannot hold it as self-acquired property which he can dispose of at his will and pleasure. The son’s right by birth operates on such property. But according to the Supreme Court decisions, above indicated, there is a conceptual revolution.
Reasons given by the Supreme Court do not seem to be tenable. No doubt the daughter is also a co-heir with the son. In her hands her sons have no rights to the property during her life-time for they have no right by birth either under statute or under the Sastric Hindu Law.
If this is an anomaly it is one created by statute and we have to put up with it. There was no such anomaly in Shastric law because the daughter was not co-heir along with the son. When by statute the daughter is made a co-heir she has to take her share and it will be governed in its incidents like any other property which she inherits from anyone else.
But the son inheriting property has to reckon with the incidents of Mitakshara law. If the property is inherited from the father, it will be ancestral in his hands but not if he inherits it from anyone else (e.g. A collateral) in which case it will be his absolute self-acquired property. This again may be an anomaly but it fits in with the concept of ancestral property.
What we have to see is Yajnavalkya’s definition of ancestral property and self-acquired property. Self-acquired property according to Yajnavalkya, must be acquired “without detriment to paternal property.” How can it be said that property inherited from the father answers this description? It cannot be self-acquired. In other words, it can only be ancestral property in which the son has a right by birth. These decisions of the Supreme Court obviously require reconsideration.
In Makineni Madhuri v. Bollu Nagabhushanam, AIR 2006 (NOC) 668 (AP) : 2006 (2) CCC 204 (AP), the Court held that properties possessed by the members of a Hindu joint family cannot be said to be joint family properties unless it is established.
The Bombay High Court held in Sahebrao Tukaram Tapkir v. Baban Maruti Tapkir, 2006 (2) CCC 300 (Bom), that where the plaintiffs failed to prove that the suit properties were Hindu joint family properties, partition cannot be ordered because only the ancestral/coparcenary property can be partitioned. It needs a clear proof that the suit properties are Hindu joint family properties.
In Krishna Prasad v. Shyam Narayan Prasad, AIR 2006 Sikkim 25, the Court held that the share a coparcener gets on partition of his ancestral properties becomes a joint property with regard to his male lineal descendants up to the four degrees who take share in it by birth.
Therefore, where the coparcener alienated the ancestral property, which had come in his hands on partition, was, by way of exchange his male lineal descendants within four degrees would be members of coparcenary and would have rights and interest over such property and could challenge the exchange made by their ascendant.
In Hari Shankar Singhania v. Gaur Hari Singhania, AIR 2006 SC 2488: 2006 (3) Supreme 566: 2006 (2) Arb. LR 1 (SC): 2006 (2) CCC 188 (SC), the Supreme Court made it clear that a family settlement is treated differently from any other formal commercial settlement as such settlement in the eyes of law ensures peace and goodwill among the family members.
Such family settlements generally meet with approval of the Courts. Such settlements are governed by a special equity principle where the terms are fair and bona fide, taking into account the well being of a family. The concept of ‘family arrangement or settlement’ should be treated differently.
Technicalities of limitation, etc. should not be put at risk of the implementation of a settlement drawn by a family, which is essential for maintaining peace and harmony in a family. Also it can be seen from decided cases of this Court that, any such arrangement would be upheld if family statements were entered in to allay disputes existing or apprehended and even any dispute or difference apart, if it was entered into bona fide to maintain peace or to bring about harmony in the family.
Even a semblance of a claim or some other ground, as say affection, may suffice as observed by this Court in the case of Ram Charan v. Girija Nandini, AIR 1966 SC 323. In Lala Khunni Lal v. Kunwar Gobind Krishna Narain, the Privy Council examined that it is the duty of the Courts to uphold and give full effect to a family arrangement.
In Sahu Madho Das v. Pandit Mukand Ram, 1955 (2) SCR 22, (Vivian Bose, Jagannadhadas and B.P. Sinha, JJ.) placing reliance on Clifton v. Cockburn, (1834) 3 Ìó & Ê 76, and William v. William, (1866) LR 2 Ch 29, this Court held that a family arrangement can, as a matter of lay, be implied from a long course of dealings between the parties.
It was held that “…………..so strongly do the Courts lean in favour of family arrangements that bring about harmony in a family and do justice to its various members and avoid, in anticipation, future disputes which might ruin them all, that we have no hesitation in taking the next step (fraud apart) and upholding an arrangement”.