# COMMISSIONER OF INCOME-TAX, MADRAS v. M. K. STREMANN, MADRAS

- **Citation:** [1965] 2 S.C.R. 106
- **Court:** Supreme Court of India
- **Decided:** 1964-11-09
- **Case number:** Civil Appeal No. l 105 of 1963
- **Bench:** K. SUBBA RAo, J.C. Shah Ands. M. Sikri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-madras-v-m-k-stremann-madras-3294
- **Pages:** 6

## Headnote

Income-tax Act, 1922 (11 of 1922)-Partition detd-Contairung reel"
tal that self-acquired prop.,ty already blended with Joint Hindu family property-Only evidence of blending whether sufficient to show paNition mlid
to justify an order under s. 25A-Qr deed merely a transfer to minors under
A
B
r. 16(3)(a)(iv).
C
For some years until 1952-53, the asses.see was assessed as an individual
in respect of income from a house that was admittedly Joint Hindu family
property and income from a selling agency. He maintained only one set
of accounts for income from both these sources. On December 19, 1952,
a deoo of partition was executed between the assessee and his three minor
children, who were represented by their mother. In the course of assessment proceedings for tho year 1953-54, the assessee claimed that an order
D
under s. 25A he passed and separate assessments made on each of the
members of the erstwhile family as from December 19, 1952.
The Income Tax Officer rejected this claim, holding that merely because
the income from ancestral property and self acquired propeny was not
•eparately accounted for, the latter did not become part and parcel of
Joint family property; he further held that there was no partition by
vinue of the deed, but simply a direct or indirect transfer made l>y the
assessee of his own self-acquired property within the meaning of s.
E
16(3) (a) (iv).
The Appellate Assistant Commissioner and tho Appellate Tribunal confirmed the \iew taken by tho Income-tax Officer, but, upon a reference
made to it, the High Court held that the deed executed in December
19, 1952, amounted to a valid partition and was not a transfer within the
meaning of a. 16(3)(a)(iv).
It was contended on behalf of Revenue that the only evidence that
all assets and liabilities including the agency business were transferred to
the ·joint Hindu family was a recital in the partition deed itself and there
was no antecedent blending of the self-acquried property with ancestral
property before it was partitioned among the parties. All the clauses of
the deed took effect on the signature of the deed and no amount of
time elapsed between the alleged blending and partition.
HELD : From the time when instructions were given that the self -
acquired property was to be treated as joint family property in the deed
to be executed, the propeny assumed the character of the Joint family
property. On execution, the deed became evidence of a pre-existing fact,
i.e of throwing a self-acquired property into the hotch-potch. [110 G]
The High Coun was ri~t in holding that the partition proceeded on
the basis that the self-acqmred property was made available for partition
along with the only item of joint family property. That itself constituted
proof that antecedent to the panition, however short 'the interval, there
was blending of the self acquired property of the assessee with his ancestral
joint family property.
The result was that at least on December 19,
1952, antecedent to the partition, tho properties became impressed with
F
G
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•
A
C. I. T. V. STREMANN (Sikri, J.)
107
the character of joint family property. Thore was a partition on December 19, i952.
Thereafter, the properties allotted to the shares of the
as.sessee and his divided sons were held by them in severalty. [110 H;
Ill A. C-DJ
(ii) The partition deed did not amount to direct or indirect transfer
to the minor children by the asseosee within s. 16(3) (a)(iv).
C.J.T. Gujarat v. Keshav/al Lallubhai, [1965] ~ S.C.R. 99, followed.

## Text

106
COMMISSIONER OF INCOME-TAX, MADRAS
v.
M. K. STREMANN, MADRAS
November 9, 1964
[K. SUBBA RAo, J.C. SHAH ANDS. M. SIKRI, JJ.]
Income-tax Act, 1922 (11 of 1922)-Partition detd-Contairung reel"
tal that self-acquired prop.,ty already blended with Joint Hindu family property-Only evidence of blending whether sufficient to show paNition mlid
to justify an order under s. 25A-Qr deed merely a transfer to minors under
A
B
r. 16(3)(a)(iv).
C
For some years until 1952-53, the asses.see was assessed as an individual
in respect of income from a house that was admittedly Joint Hindu family
property and income from a selling agency. He maintained only one set
of accounts for income from both these sources. On December 19, 1952,
a deoo of partition was executed between the assessee and his three minor
children, who were represented by their mother. In the course of assessment proceedings for tho year 1953-54, the assessee claimed that an order
D
under s. 25A he passed and separate assessments made on each of the
members of the erstwhile family as from December 19, 1952.
The Income Tax Officer rejected this claim, holding that merely because
the income from ancestral property and self acquired propeny was not
•eparately accounted for, the latter did not become part and parcel of
Joint family property; he further held that there was no partition by
vinue of the deed, but simply a direct or indirect transfer made l>y the
assessee of his own self-acquired property within the meaning of s.
E
16(3) (a) (iv).
The Appellate Assistant Commissioner and tho Appellate Tribunal confirmed the \iew taken by tho Income-tax Officer, but, upon a reference
made to it, the High Court held that the deed executed in December
19, 1952, amounted to a valid partition and was not a transfer within the
meaning of a. 16(3)(a)(iv).
It was contended on behalf of Revenue that the only evidence that
all assets and liabilities including the agency business were transferred to
the ·joint Hindu family was a recital in the partition deed itself and there
was no antecedent blending of the self-acquried property with ancestral
property before it was partitioned among the parties. All the clauses of
the deed took effect on the signature of the deed and no amount of
time elapsed between the alleged blending and partition.
HELD : From the time when instructions were given that the self -
acquired property was to be treated as joint family property in the deed
to be executed, the propeny assumed the character of the Joint family
property. On execution, the deed became evidence of a pre-existing fact,
i.e of throwing a self-acquired property into the hotch-potch. [110 G]
The High Coun was ri~t in holding that the partition proceeded on
the basis that the self-acqmred property was made available for partition
along with the only item of joint family property. That itself constituted
proof that antecedent to the panition, however short 'the interval, there
was blending of the self acquired property of the assessee with his ancestral
joint family property.
The result was that at least on December 19,
1952, antecedent to the partition, tho properties became impressed with
F
G
H
•
A
C. I. T. V. STREMANN (Sikri, J.)
107
the character of joint family property. Thore was a partition on December 19, i952.
Thereafter, the properties allotted to the shares of the
as.sessee and his divided sons were held by them in severalty. [110 H;
Ill A. C-DJ
(ii) The partition deed did not amount to direct or indirect transfer
to the minor children by the asseosee within s. 16(3) (a)(iv).
C.J.T. Gujarat v. Keshav/al Lallubhai, [1965] ~ S.C.R. 99, followed.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. l 105 of
1963.
Appeal by special leave from the judgment dated August 30,
1960 of the Madras High Court in C. R. No. 49 of 1956.
c
K. N. Rajagopala Sastri and R. N. Sachthcy, for the appellant.
D
E
F
R. Ganapathy Iyer, for the respondent.
A. V. Viswanatha Sastri, T. A. Ramachandran, J. B. Dadachanji, 0. C. Mathur and Ravinder Narain, for the intervener.
The J udgrnent of the Court was delivered by
Sikri, J.
This is as appeal by special leave directed against
the judgment of the Madras High Court answering a question
referred to it by the Appellate Tribunal against the Revenue. The
Appellate Tribunal had referred the following three questions :
1. Whether there was material for the Tribunal to reach
the conclusion that the various assets in question
belonged only to the assessee in his individual capacity
till 19th December 1952?
2· If the answer to the first question is in the affirmative,
whether the deed, Annexure 'B' aforesaid, amounted to
a transfer of assets to the three minor children aforesaid
so as to attract the provisions of Section 16 ( 3 )(a)( iv)
of the Income-Tax Act ?
3. If the answer to the first question is in the negative,
the Income Tax Officer having rejected the claim of
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partition under Section 25A and the assessee not having
independently appealed against such decision, whether
the assessee is entitled in law to any modification of the
assessment other than the status alone ?
Question No. 1 was answered by the High Court in favour of
the Revenue; question No. 2 against the Revenue, and question
H
No. 3 in favour of the assessee.
The respondent, M. K. Strem·
ann, hereinafter referred to as the assessee, has not filed any appeal
against the answer given to question No. 1, and this has become
108
SUPRBMB COURT REPORTS
[1965] 2 S.C.R.
final.
From the way the questions have been worded, we are only
A
concerned with the point whether the High Court rightly answered
question No. 2.
The facts relevant for the disposal of this appeal are as follows.
The father of the assessee, Kulandavelu Mudaliar, was an agent
of Muller & Phipps (India) Ltd., for the sale of its pharmaceutichl
B
preparations in Madras.
While he was an agent, the assessee
was employed as an assistant by the said Company.
Kulandavelu
died on July 27, 1938, leaving a house property at Ayalur
Muthiah Mudali Street, a few insurance policies and income-tax
refunds due to him.
The assessee realised a total amount of
Rs. 26,600/- from these and with these proceeds he purchased
C
a house at No. 3, Varadarajulu Naidu Street in December, 1945.
There is no dispute that this property was joint Hindu family
property.
On the retirement of his father as agent of Muller and Phipps
Ltd., the assessee was appointed as agent in his individual capacity.
D
From 19~8-39 till 1952-53, he was assessed as an individual not
only on the income from the agency but also income from joint
Hindu family property.
He maintained only one set of accounts
both for his income from the agency and from joint family property.
In 1944, one son was born, and another son was born in 1945.
On December 19, 1952, the assessee executed a deed of partition and on its basis claimed before the Income Tax Officer, in the
course of assessment proceedings for the assessment year 1953-54
(accounting year ending March 31, 1953) that an order under
s. 2SA be passed and separate assessments made on each of the
E
members of the erstwhile family as from December 19, 1952. The F
•
Income Tax Officer held that 'the mere existence of any a11cestral
property, however small, would not render all self-acquired property part and parcel of the joint Famjly assets by the mere fact
that the incomes are not separately accounted for'. He held that
there was no partition but simply a case of donation made by the
assessee of his own self-acquired property and s. 16(3)(a)(iv)
Q
was attracted. In the alternative, he held . that assuming that the
assessee's assets have been "thrown into the common stock and
after becoming assets of the joint family was divided between him
and minor children. Section 16 ( 3 )(a)( iv) is again
attracted
because the said section applies to both the direct and indirect
H
transfers of the assets to minor children. . . . It would have been
an indirect transfer to make (minor) children if the transfer is
effected by the interposition of a joint family by a legal fiction."
A
B
c
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C. I. T. V. STREMANN (Sikri, J.)
109
On appeal, an additional point was sought to be made by the
assessee that the commission business was ancestral business in his
hands, but the Appellate Assistant Commissioner did not accede
to this contention.
He further held that the Income Tax Officer
was justified in ignoring the partition deed.
The Appellate Tribunal held that there was no evidence that
all assets and liabilities including the agency business were transferred to the JHF in 1944, when his first son was born, or later.
It further observed :
"The first time we hear of. the family possessing the assets
in question is the deed of dissolution in which there is a
recital to that effect.
This certainly cannot constitute an
unequivocal declaration of the
admitted individual
investing his self-acquired properties with the character
of joint family property referred to in the judgment in
28 I.T.R. 352 (R. Subramania Ayyar v. Commissioner
of Income Tax)".
Accordingly, it held that the partition deed came within the ambit
of s. 16. As stated above, the Appellate Tribunal referred three
questions to the High Court.
The High Court answered the
questions in the manner mentioned above.
Mr. Rajagopala Sastri, the learned counsel for the Revenue,
has urged the following points :
( 1) That question No. 2 did not arise out of the order
of the Appellate Tribunal and the High Court should
have refused to answer the question.
( 2) That before the partition there was no antecedent
blending of self-acquired properties with ancestral property.
( 3) That the partition deed effects a direct transfer of
assets to the minor children within s. 16 (~)(a)( iv).
G
The first point was not raised before the High Court, or in the
statement of the case in this Court.
We accordingly cannot allow
this point to be raised at this stage.
The second point depends on the interpretation of the partition deed, dated December 19, 1952. This deed was executed between the assessee, his two minor sons and minor daughter, the latter
H
three being represented by their mother.
It recites that the father
of the assessee died on July 27, 1938, leaving a house and other
movable investment and cash and that the assessee succeeded to
110
SUPREME COURT REPORTS
[1965] 2 S.C.R.
the said property and the agency of Messrs Muller & Phipps.
A
Then follow two clauses which are important and they are :
"Whereas the party of the first part has been earning
commission and acquiring properties and blending his
money with the assets inherited from his father and treating the entire properties extant before and after the birth
B
of the parties of the second and (third) parts till this
date as joint family property without making any discrimination or distinction; ·
Whereas the party of the first part is desirous of maldng
the legal character of the assets that exist now and the
c
legal relationship between the parties definite and to
make an arrangement of partition of the parties of the
first, second and third parts and also to provide for
making jewels, maintenance and marriage for the party
of the fourth part, in exercise of his powers as a Hindu
father, in order to ensure peaceful enjoyment and friendly
D ·
relationship between the parties and to keep his own
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future earnings separate with powers to deal with them
in any manner be liked."
Mr. Sastri contends that as the recital in the ~t clause
reproduced above has been found to be false, there is no anteE
cedent blending of the se'f-acquired property with ancestral property before it is partitioned among the parties.
He says that
all the clauses took effect on the signature of the deed, and no
moment of time elapsed between the alleged blending and partition.
Vie are unable to accede to this contention. In the first
clause above, it is recited that the assessee has been blending his F
money with inherited assets till this date.
In other words, it
asserts a continuous course of conduct ending with the day when
the deed was executed. The deed seems to .be carefully drafted
and the assessee must have given instructions as to the contenlli
of the draft.
When instructions are given that the self-acquired
property is to be treated as joint family property, in our opinion,
G
at that moment the property assumes the character of joint family
property. On execution, the deed becomes evidence of a preexisting fact i.e. of throwing the self-acquired property int& the
hotch-potch. The words "till this date" are significant and must
be given effect to.
The High Court, in our opinion, was right i•
observing that "the partition proceeded on this basis that the selfH
acquired properties were made available for partition alongwith
the only item of joint family property. That itself constituted
..
A
c
D
C. L T. V. STREMANN (Sikri, J.)
11 I
proof that antecedent to the partition, however short the interval, there was blending of the self-acquired properties of the
assessee with his ancestral joint family property." We agree with
the High Court that "whether the averment in relation to the
past was supported by other evidence or not, it certainly was
unequivocal that the properties dealt with at the partition were
treated by the volition of the assessee as the properties available
for partition between the members of the joint family.
It was
certainly an unequivocal declaration that all the properties dealt
with under that partition had been impressed with the character
of joint family properties, properties belonging to the joint family
of the assessee and his sons.
The genuineness of the transaction
itself was never in issue.
The result was that at least on 19th
December. 1952, antecedent to the partition, the properties
became impressed with the character of joint family property.
There was a partition on 19th December, 1952. Thereafter, the
properties allotted to the shares of the assessee and his divided
sons were held by them in severalty."
We have just pronounced judgment in The Commissioner of
Income Tax, Gujarat v. Keshavlal Lallubhai('), and following
that judgment we hold that there is no force in the third point
raised by Mr. Sastri.
E
Agreeing with the High Court, we hold that there was no
direct or indirect transfer of assets to the minor children by the
\ assessee within s. 16(3)(a)(iv).
The appeal accordingly fails and is dismissed with costs.
Appeal dismissed
(I) (1965) 2 S.C.R. 99.