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1995 Supreme(Mad) 27
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE K.A. THANIKKACHALAM & THE HONOURABLE MR. JUSTICE JAYARAMA CHOUTA
Commissioner of Income Tax - Appellant
Versus
A.M. Vaiyapuri Chettiar and Another - Respondents
Cases Nos. 725 to 728 of 1984
Decided On : 05 January 1995
A reunion is a matter of contract and there should necessarily be a junction of the estate to validate the reunion.
Headnote:
HINDU LAW - REUNION OF HUF - VALIDITY - CONDITIONS PRECEDENT - JUNCTION OF ESTATE - ESSENTIAL - CLAUSE GIVING OPTION TO BRING IN WHATEVER PROPERTY THEY LIKE TO BRING IN, IN THE REUNITED JOINT FAMILY - INVALID - ENTIRE PROPERTIES OF THE ERSTWHILE JOINT FAMILY PRIOR TO THE PARTITION WOULD BE THE PROPERTIES OF THE REUNITED JOINT FAMILY.
Fact of the Case:
There was a joint family consisting of two coparceners, Shri Vaiyapuri Chettiar and his only son, Shri V. Rajkumar. On 1st April, 1966, there was a partial partition of some of the movable properties of the family. On 7th Feb., 1967, there was a second partial partition of the other movable properties. On 14th April, 1971, there was a total and complete partition of the immovable properties. On 1st Oct., 1979, Vaiyapuri Chettiar and V. Rajkumar executed an instrument called "deed of declaration of reunion" on a stamp paper of Rs. 50. This document recited the previous partitions in the family and the desire and agreement of the parties for effecting a reunion so as to constitute a joint Hindu family of the parties and to constitute a joint family fund by virtue of such reunion so as to form a nucleus thereof by bringing in any or some of the properties allotted on partition of the erstwhile joint family and under this declaration the father and son brought a fixed deposit of Rs. 50, 000 each kept with Rajkumar Chit Fund (P) Ltd., as their contribution for the reunited joint family and declared their having reunited and the reunited joint family alone having the rights in respect of those assets totalling Rs. 1, 00, 000.
Finding of the Court:
The Tribunal held that the reunion effected by the assessee under the deed of reunion dt. 1st Oct., 1979, is valid. However, the clause giving option to the parties to bring in whatever assets they would like to bring in into the reunited joint family is deleted. The entire properties of the erstwhile joint family prior to the partition would be the properties of the reunited joint family.
Issues: Whether the reunion effected by the assessee under the deed of reunion dt. 1st Oct., 1979, is valid.
Ratio Decidendi: A reunion is a matter of contract and there should necessarily be a junction of the estate to validate the reunion. The contract of reunion would merely establish a joint status and the junction of estates that is bringing back all the properties once divided and made available for being brought back would only be a necessary consequence whether the parties intended it or not. therefore, the junction of estates being a legal implication of the agreement to reunite, the coparceners reuniting cannot avoid that consequence by contracting out of that implication as such a condition enabling the coparceners to keep out any of the properties would be void.
Final Decision: The question is answered in the affirmative and against the Department. No costs. Counsel's fee is fixed at Rs.1,000.
THANIKKACHALAM, J.
At the instance of the Department, the Tribunal referred the following common question both in the IT assessment as well as in the GT assessment relating to the asst. yr. 1980-81, in the case of both the assessees under s. 256(1) of the IT Act, 1961, for our opinion:
"Whether, on the facts and in the circumstances of the case, there was a valid reunion of Vaiyapuri Chettiar and his son, Rajkumar, to constitute a new HUF?"
2. There was originally a joint family consisting of two coparceners, Shri Vaiyapuri Chettiar and his only son, Shri V. Rajkumar. On 1st April, 1966, there was a partial partition of some of the movable properties of the family. On 7th Feb., 1967, there was a second partial partition of the other movable properties. On 14th April, 1971, there was a total and complete partition of the immovable properties. This partition was accepted by the ITO by an order passed under s. 171 of the IT Act, 1961, on 9th March, 1973. On 1st Oct., 1979, Vaiyapuri Chettiar and V. Rajkumar executed an instrument called "deed of declaration of reunion" on a stamp paper of Rs. 50. This document recited the previous partitions in the family and the desire and agreement of the parties for effecting a reunion so as to constitute a joint Hindu family of the parties and to constitute a joint family fund by virtue of such reunion so as to form a nucleus thereof by bringing in any or some of the properties allotted on partition of the erstwhile joint family and under this declaration the father and son brought a fixed deposit of Rs. 50, 000 each kept with Rajkumar Chit Fund (P) Ltd., as their contribution for the reunited joint family and declared their having reunited and the reunited joint family alone having the rights in respect of those assets totalling Rs. 1, 00, 000. Consequently, there were three units, firstly, Shri Vaiyapuri Chettiar with the separated assets claiming to be the Karta of a smaller HUF consisting of himself and his wife, secondly, Rajkumar with the separated assets claiming to be the Karta of a smaller HUF consisting of himself and his wife and, thirdly, the joint family consisting of Vaiyapuri Chettiar, his son and their wives with this asset of Rs. 1, 00, 000.
3. On these facts, the assessee contended that the interest arising from the sum of Rs. 10 lakhs (?) cannot be assessed in the hands of the two smaller joint families which were being separately assessed on their own income on the ground that the interest accrued to the revived joint family consisting of Vaiyapuri Chettiar and Rajkumar.
4. On the other hand, the Department contended that firstly, the reunion was a revival of the earlier divided family and should, therefore, restore this position to a point of time before the partition by bringing back all the assets that had been divided. Secondly, the Department contended that the document expressed an intention to form a new nucleus for creating a fresh HUF which was untenable because a joint family is a creature of law and cannot be created by contract. Thirdly, the Department contended that the intention to reunite must be apparent from the motive behind it and when there is no motive relevant for the reunion except for an irrelevant motive of reduction of tax, such a reunion cannot be recognised in law. Lastly, it was contended that after the amendment of the IT Act by the introduction of sub-s. (9) to s. 171 it was not possible, as far as income-tax purposes were concerned, to effect a partial partition because the reunion with only some of the assets amounted to a full reunion and an immediate subsequent partial partition which cannot be recognised since an assessee cannot be allowed to do indirectly what he could not have done directly. Thus, according to the Revenue, the reunion set up by the assessees was invalid and cannot be recognised.
5. On the other hand, the assessees contended firstly that the characteristics of the reunion remain on the same footing as of a partit
