Commissioner of Income-tax, Assam v. Nandlal Aggarwal & Anr.
Sikri, J. This appeal in pursuance of a certificate granted
under s. 66A(2) of the Indian Income Tax Act, 1922, herein
after 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 Kisbanlal 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, oy his order
dated June l, 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 Agar-
walla 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 Sep
tember, 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 subject
matter of this reference, a return was filed in the status of a Joint
H Hindu Family by the two guardians .
It appears that on March 25, 1958, the Sub-Judge, Nowgong,
passed the following order :
L3Sllp. C.l./'6-9
614 SUPREME COURT REPORTS [1966) 2 S.C.R.
"Account ilpto 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 hencefor
ward 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.
c 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 Com
missioner 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 D
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 E
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 indi
vidual share of profits at the rate applicable to the indivi~ual
incomes. For that purpose the total income should be computed F
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 H
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.
,
C.I.T. V. NANDLAL (Sikri, J.) 615
A 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
B children individually on whose behalf such income was receivable
by the guardians had not been adverted to. The Appellate Tri
bunal, 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 deci
sion that the assessee was a H.U.F. The Tribunal refused to state
C 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 answered
the question in the negative. The High Court held that the guar
dians "received the shares of these minors in the profit of the
D bnsiness 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 separate
ly 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
E 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
F 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
G 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 res
pondents, contends that the minors would not have been assess
ed 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 res-
H pect 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 SUPREME COURT REPORTS [1966) 2 S.C.R.
March 25, 1958, which shows that the interest of the minors was A
separate.
It is not necessary to decide the question whether under the
Guardianship Act a guardian could have been appointed in res-
pect of the undivided interest of the minors. There is authority
for the proposition that when all the co-parc.eners are minors, a B
guardian can be appointed for the whole number. (see Bindaji
Lusuman Triputikar v. Mathurabai) ('), 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 c
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 D
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, E
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 can- •
not 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 jurisdic- F
tion to partition property belonging to a joint Hindu family there
are no words in the order to warrant such a finding.
Reference was made to Saifudin Alimohamed v. Commissioner
of Income Tax(') and Commissioner of Income Tax v. Balwant-
rai Jetha/al Vaidya(•). We agree with the view expressed by G
Chagla, C.J., in the latter case in which he explained certain ob
servations 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 H
(I} I. L. R. 30 Bombay 152. (2) 25 I. T. R. 237.
(3) 34 I. T. R .187.
C.I.T. V. NANDLAL (Sikri, J.) 617
A minors as constituting a H.U.F. In the result the appeal iS accept
ed and the q~stioo :eferred to the High Court is answered in the
affirmative. Tte appellant will have his costs here and in the
High Court.
Appeal allowed •