Despite scores of judicial decisions, the circumstances in which a Hindu undivided family comes into existence has been the subject of debate and controversy. Under the Income-tax Act, 1961, a hindu undivided family is assessed to income-tax as a distinct unit of assessment.
Once a family is assessed as a Hindu undivided family, it would continue, even after partition, to be assessed as an undivided family till a finding of partition is given under section 171 by the assessing officer.
A joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters; while a Hindu coparcenary is a much narrower body including only those persons who acquire by birth an interest in the joint or coparcenary property (Gowli Buddanna v. C.I.T. (60 I.T.R. 293 (SC)). A joint Hindu family may be composed of smaller or branch joint families which may hold properties in their own right and may themselves be assessable units as distinct from the apex jointfamily (C.I.T. v. Khanna (49 I.T.R. 232).
The privy council observed in Kalyanji Vithaldas v. C.I.T. (5 I.T.R. 90) that the expression Hindu undivided family is used in the Income-tax Act with reference not to one school to read it as equivalent to the narrower expression Hindu coparcenary (Sushila v. I.T.O. (38 I.T.R. 316).
The Supreme Court held in Gowli Buddanna that there need not be more than one male member to form a Hindu undivided family alongwith female members (Vedathanni v. C.I.T. (1 I.T.R. 70 (SB)); that even if the family is reduced to a sole surviving coparcener with other female members, the property and income belong to the joint family, and in respect of such income the tax is leviable on the joint family and not on the male member as an individual (Attorney-General v. Arunachalam (34 I.T.R. (ED) 42 (PC)).
This principle applies also where joint family property is partitioned and property is allotted to a coparcener who has a wife but no male issue; in such a case the income from theproperty is assessable as the income of the Hindu undivided family composed of the member and his wife (and daughters, if any), and cannot be included in the assessment of the member as an individual (Narendranath v. C.W.T. (74 I.T.R. 190 (SC)).
The same position prevails where a coparcener marries after the partition : on his marriage, the income from the property allotted to him should be assessed as that of the Hindu undivided family consisting of him and his wife (Premkumar v. C.I.T. (121 I.T.R. 347).
The Supreme Court held in C.I.T. v. Veerappa Chettiar (76 I.T.R. 467) that after the death of the last male member, the Hindu undivided family may consist of female members only.
However, a single person, male or female, cannot constitute a Hindu undivided family (Krishna Prasad v. C.I.T. (97 I.T.R. 493- (SC)).
In view of the Hindu Succession Act, 1956, the separate property of the father inherited upon intestacy by the son is to be treated as the son's separate property and not as the property ofhis joint family (C.W.T. v. Chander (161 I.T.R. 370 (SC)).
A member of a Hindu undivided family is not taxable at all in respect of any sum which he receives as such member out of the income of the family, even though the family may not have paid the tax on its income. However, income from separate and self-acquired property of a Hindu which has not been thrown into the common stock is assessable as the income of the individual and not as the income of a Hindu undivided family, even though the Hindu has sons from whom he is not divided family, even though the Hindu has sons from whom he is not divided, for the sons have no interest in such income (Kalyanji v. C.I.T. (5 I.T.R. 90, 94 (PC)).
The general principle of tax law that income from an individual members' property thrown into the family hotchpot is taxable as the income of the joint family, is superseded by section 64 (2).
The commission earned under a managing or selling agency (Murugappa v. C.I.T. (21 I.T.R. 311) or insurance agency (Ram Jhav. C.I.T. (31 I.T.R. 987)) agreement by a karta or other coparcener would prima facie be his individual income, unless it is shown that the rights had been acquired with the aid of joint family property (Re Haridas (15 I.T.R. 124)).
Offering received by the holder of the hereditary office of the head of a religious sect are his personal income, where the functions and obligations attached to that office are personal (Ranchhodraiji v. C.I.T. (54 I.T.R. 664). The salary received by the treasurer of a bank, whose office requires personal responsibility, integrity and ability, would be his individual income, although joint family properties may have been furnished as security to the bank (Piyarelal v. C.I.T. (40 I.T.R. 17 (SC)).
A member of a trading joint family may carry on business on his personal account, in which event the profits would be his individual income and not the income of the joint family (Padampat v. C.I.T. (24 I.T.R. 184)), although the member might have borrowed the requisite capital outof the joint family funds (C.I.T. v. Thaver (2 I.T.R. 230) ) or the member might, after earning the income as his own, throw it into the family hotchpot (Amarchand v. C.I.T. (30 I.T.R. 38)).
Such members carrying on business on their personal account in partnership may be assessed as a firm (Harisingh v. C.I.T. (2 I.T.C. 80)). However, the mere execution of a partnership deed by the members of the family will not preclude an assessment on the undivided family as such in respect of the profits of the business (C.I.T. v. Doraiswami (1 I.T.C. 214).
If a coparcener utilises joint family funds for contributing his share of capital in the firm, he should be regarded as having entered into partnership on behalf of, and as representing, the family (C.I.T. v. Kalubabu (37 I.T.R. 123)).
Last year, the Punjab & Haryana High Court in C.I.T. v. Bhagat Singh (229 I.T.R. 239), held that all persons lineally descended from a common ancestor, including their wives and unmarried daughters constitute a Hindu undividedfamily which is a normal condition of Hindu society. There need not be atleast two male members to constitute a Hindu undivided family. A Hindu undivided family can consist of a male Hindu, his wife and unmarried daughter.
The facts in this case were that B constituted a Hindu undivided family with his wife, son and four daughters. Partial partition took place between B, his wife and his children. It was out of ancestral property that the partition was effected on April 1, 1971. This partition was duly recognised by the department.
On November 23, 1971, another daughter was born to B. B. claimed that in respect of the property acquired in partition, there was a Hindu undivided family composed of him and his daughter. He claimed exclusion of dividual assessment. The income-tax officer rejected this contention by observing that since his wife was already separated from the Hindu undivided family, subsequent birth of a daughter to him, would not get back to him the status os a Hindu undivided family.However, the Tribunal accepted his contention.
On a reference, the Punjab and Haryana high court held that what was received by the assessee on partition was part of the ancestral property which did not cease to be Hindu undivided family property and on the birth of a daughter subsequently, the assessee constituted a Hindu undivided family qua the property received in partition.
Qua this property, the court held that his status reverted to that of a Hindu undivided family and the income received from this property could not be assessed in his hands as an individual, but the same was to be assessed in the status of the Hindu undivided family consisting of himself and his daughter.
Finally, in an interesting decision in C.I.T. v. Pratapchand (36 I.T.R. 262), a Hindu who declared for the purposes of the Special Marriage Act, 1872 or 1954 that he did not profess the Hindu religion, did not thereby cease to be a Hindu : the Hindu law still applied to him, with the result that he would be entitled to file areturn as karta of a joint family in respect of the income from the ancestral properties.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.