# RM. AR. RM. AR. Rr11nanctha11 Chettiar v. Con11nfr.fioner o/ /11co111f'·

- **Citation:** [1970] 3 S.C.R. 307
- **Court:** Supreme Court of India
- **Decided:** 1969-12-04
- **Bench:** J.C. Shah, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rm-ar-rm-ar-rr11nanctha11-chettiar-v-con11nfr-fioner-o-11co111f-4917
- **Pages:** 4

## Headnote

307
lnconze Tax-Hindu Undivided Fcunily-Estate duty paid out of joint
family estate-Levy of duty held illegal-Refunded wit/1 i"terest--On
partition a share in the interest if assel'sahl<! to tc:.t.
The revenue authorities in Ceylon- levied estate <luty in respect of the
c•tate of A and his son in the hands of their three widows. The Judicial
Committee of the Privy Council set aside the levy and
in
1957 the
Government of Ceylon deposited in Court the duty which was levied.
with interest.
On February 17, 1947, the joint family estate was parti·
tioned among the three widows and their adopted sons. The Income-tax
Officer brought to l•x one of the adopted son's share of the interest received from the Ceylon Government on the estate duty.
The Tribunal
reversed the assessment order holding that the amount of interest received
hy the a5'cssec was of a capital nature and was on that account not liable
to tax. On a reference the High Court was of the opinion that the assessce's share in the interest attributable to the period ending February 17,
1947 was not taxable but the share attributable to the period between
that date and the date of payment by the Ceylon Government was tax·
able.
Jn the view of the High Court the amounto;; paid as estate duty had
to be deemed in law to have come front the joint family estate and on
severance of the joint family status in Febr!.lary 1947 each adopted son
received his share in the e·state then existing as capital.
The Commissioner appealed to this Cou'rt. It was contended that the
character of the receipt which was revenue when received by the joint
family could not be altered when it was divided bet~·ecn the members of
the joint family. Dismissing the ~ppeal,
HELD : On the severance of the joint status
the
assessee
became
entitled to· a ·share in the family estate.
Tite amount of interest on the
estate duty accrued as income to the joint family but it was income of
the joint family and not of the individual members.
But when a share
out of the estate which included the interest on estate duty was received
by the asscssce it had not the character of income. Once the income was
received by the joint family, the amount lost its character of income : it
became merged in the joint family estate and became the capital of the
family.
The share received by the assessee \Vas therefore a share in the
capital of the family.
Therefore, the share in the joint family property
which included interest on the estate duty I\ hich accrued prior to February
17, 1947 was rightly held by the High Court to be not of the nature of
revenue and accordingly not taxable. [J to C-F.1
RM. AR. RM. AR. Rr11nanctha11 Chettiar v. Con11nfr.fioner o/ /11co111f'·
tax Madras, 63 J.T.R. 458. distinguished.
H
[The Court did not express any opinion on the correctness of the
finding of the High Court that the interest accrue4 due after February 17,
J 947 must be regarded as income to the extent "of the •hare of each of
the members of the family.]
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SUPREME COURT REPORTS
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## Text

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COMMISSIONER OF INCOME·TAX, MADRAS
1'.
RN. AR. AR. VEERAPPA CHETTIAR
December 4, 1969
[J.C. SHAH AND K. S. HEGDE, JJ.J
307
lnconze Tax-Hindu Undivided Fcunily-Estate duty paid out of joint
family estate-Levy of duty held illegal-Refunded wit/1 i"terest--On
partition a share in the interest if assel'sahl<! to tc:.t.
The revenue authorities in Ceylon- levied estate <luty in respect of the
c•tate of A and his son in the hands of their three widows. The Judicial
Committee of the Privy Council set aside the levy and
in
1957 the
Government of Ceylon deposited in Court the duty which was levied.
with interest.
On February 17, 1947, the joint family estate was parti·
tioned among the three widows and their adopted sons. The Income-tax
Officer brought to l•x one of the adopted son's share of the interest received from the Ceylon Government on the estate duty.
The Tribunal
reversed the assessment order holding that the amount of interest received
hy the a5'cssec was of a capital nature and was on that account not liable
to tax. On a reference the High Court was of the opinion that the assessce's share in the interest attributable to the period ending February 17,
1947 was not taxable but the share attributable to the period between
that date and the date of payment by the Ceylon Government was tax·
able.
Jn the view of the High Court the amounto;; paid as estate duty had
to be deemed in law to have come front the joint family estate and on
severance of the joint family status in Febr!.lary 1947 each adopted son
received his share in the e·state then existing as capital.
The Commissioner appealed to this Cou'rt. It was contended that the
character of the receipt which was revenue when received by the joint
family could not be altered when it was divided bet~·ecn the members of
the joint family. Dismissing the ~ppeal,
HELD : On the severance of the joint status
the
assessee
became
entitled to· a ·share in the family estate.
Tite amount of interest on the
estate duty accrued as income to the joint family but it was income of
the joint family and not of the individual members.
But when a share
out of the estate which included the interest on estate duty was received
by the asscssce it had not the character of income. Once the income was
received by the joint family, the amount lost its character of income : it
became merged in the joint family estate and became the capital of the
family.
The share received by the assessee \Vas therefore a share in the
capital of the family.
Therefore, the share in the joint family property
which included interest on the estate duty I\ hich accrued prior to February
17, 1947 was rightly held by the High Court to be not of the nature of
revenue and accordingly not taxable. [J to C-F.1
RM. AR. RM. AR. Rr11nanctha11 Chettiar v. Con11nfr.fioner o/ /11co111f'·
tax Madras, 63 J.T.R. 458. distinguished.
H
[The Court did not express any opinion on the correctness of the
finding of the High Court that the interest accrue4 due after February 17,
J 947 must be regarded as income to the extent "of the •hare of each of
the members of the family.]
'
:308
" ..
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·-
SUPREME COURT REPORTS
·'
. '
. [1970] 3 S.C.R.
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CIVIL APPELLATE JURISDICTION : Civil Appeal 'No. 2315 of
,1966.
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Appeal from the judgment and order, dated August 25, 1965
<>f the Madras High Court in Tax Case No. 216 of 1962 (Reference No .. 121 of 1962).
SukumarMitra and R. N. Sachthey, 'for the appellant.
T. A. Ramacha11dran, for the respondent.
The Judgment of the Court was delivered by
Shah, J. Arunachallam Chettiar-whom will hereinafter be·
<:ailed "A.Senior" had ·three wives-Valami Achi, Lakshmi Achi
and Nachiar Achi. By Valami Achi he had a son who was also
called Arunachallam-we will call him "A. Junior".
A Junior
married Uniayal Achi. A Senior, A. Junior and the wives of the
two members formed a joint Hindu family, possessing a large
estate in Ceylon. A. Junior died on July 9, 1934. A Senior died
<Jn February 23, 1938, leaving heirs running his two wives
LakShmi Achi and Nachiar Achi and his son's widow Umayal
Achi. The Revenue authorities in Ceylon levied Rs. 221.743 as
estate duty in respect of the estate of A. Junior and Rs. 6,33,601.76
in respect of the estate of A. Senior. The levy was challenged by
the three widows and the dispute was carried to the Judicial Com-.
mittee of the Privy Council. The Board set aside the entire levy.
In 1957 the Government of. Ceylon deposited in Court the duty
which was levied together with Rs. 7 ,97 ,072 as interest due from
the date on which the estate duty was collected.
After the death of A. Senior, there were disputes between the
tb.-ee widows Lakshmi Achi, Nachiar Achi and Umayal Achi, and
ea:ch widow adopted a son to her deceased husband. · A suit for
partition of the joint' family property was then· filed in the Civil
Court at Deokotai. Under a settlement reached on February 17,
1949 between the three widows and the adopted son of A. Junior
(whom we will hereinafter call the assessee) was held entitled
to 5/24th share in the estate.
This appeal relat~s to the liability to income-tax on the share
of the assessee ju the a!fiount of interest paid on the estate duty
which was refund_ed by the Ceylon Government after the Judicial
Committee set aside the order levying the estate duty.
·The Income-tax Officer, Karaikudi brought to tax the assessees
share of the amount interest .received from the Ceylon Government on the estate duty.
The Income-tax Officer rejected the
contention of the assessee that the receipt was of a capital nature,
and that in any case it was a casual receipt and on that ·account
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If
C,I. T1 V. VEERAPPA (Shah, J.)
exempt from tax under S. 4(3) (vii) of the Income-tax Act, 1922.
The order was confirmed by the Appellate Assistant Commissioner.
The Income-tax Appellate Tribunal, however, reversed
the order holding that the amount of interest received by the
assessee was of a capital nature and was on that account not liable
to tax.
The Tribunal referred the following question to
the High
Court of Madras under s. 66 (I) of the Income-tax Act, 1922 :
"Whether the sum of Rs. 1,20,830 or any part thereof is assessable to tax ?"
The High Court was of the opinion that the assessee's share in
the interest attributable to the period ending February 17, 1947
was not taxable, but the share attributable to the period between
that date and the date of payment by the Ceylon Governpient was
taxable.
Against that decision, with certificate granted by the
High Court the Commissioner of Income-tax has appealed to this
Court. The assessee has not appealed against the opinion insofar
as it was held that the receipt to the extent to which it related to a
period subsequent to February 17, 194 7 is taxable. In the view
of the High Court the amounts paid as estate duty must be deemed
in law to have come from the joint family estate and on severance
of the joint family status in February, 1947, each adopted son
received his share in the estate then existing as capital. Counsel
for the Revenue countended that the High Court erred in holding
that the assessee's share in the amount of interest received from
the Ceylon Government was of the nature of capital.
Counsel
submitted that the character of the receipt which was revenue
when received by the joint family, eould not be altered when it
,was divided between the members of the family.
Counsel also
contended that this Court has held that the share in the amount of
interest on estate duty received by the son adopted by Nachiar Ach.i
was liable to be taxed as income: RM. AR. AR. RM. AR. AR.
Ramanathan Chettiar v. Commissioner of Income-tax Madras(').
But that case has no relevance here. for the only argument advanced before the Tribunal and the High Court in that case was
that the receipt was of a casual and non-recurring nature and was
on ihat account exempt from tax under s.
4 ( 3 )(vii J of the
Income-tax Act. This Court negatived the contention. The Court
declined to consider the argument advanced at the Bar that the
share allotted to the adopted son of Nachiar Achi being a share
in the estate of A. Senior Wl!S of the nature of capital, because
the question did not arise out of the order made by the Income-tax
Annellato Tribun~I and was not m•de the subject-matter of •he
reference.
In RM. AR. AR. ·RM. AR. AR. Ramanathan
(!) 63. I.T.R. 45~.
L 7Sup.Cl.(NP)70-S
::JI 0
SUPREME COURT REPORTS
[1970] 3 S.C.R.
Chettiar's case(
1
) the question argued before the High Court in
A
this case was not raised betore the lncome-tax Appellate Tribunal
and was not decided.
Aftt~r the death of A. Senior the property was held by the
three widows <1s members of the Hindu Undivided family. Under
the Hindu Law it is not predicted of a Hindu joint family that
ll
there must be a male member in existence. Even after the death
of the· sole male member, so long as the property which was
originally of the Joint Hindu family remains in the hands of the
widows of the members of the family and is not divided among
them, the joint family continues.
Payment of the estate duty
was doubtless made out of the joint family fund and the interest
which accrued due, also acquired the character of joint family
C
property when received. The joint family status came to an end
only on February 17, 1947. On the severance of the joint status
the assessee became entitled to a share in the family estate. The
amount of interest on the estate duty accrued as income to the
joint family but it was income of the joint family and not of the
individual members.
But when a share out of the estate ,which
D
included the interest on estate duty was received by the assessee
it had not the character of income. Once the income was received by the joint family, the amount lost its character of income:
it became merged in the joint family assets and became the capital
of the family. The share received by the assessee was therefore a
share in the capital of the family.
The share in the joint family
L
property which included interest on the estate duty wluch accrued
prior to February 17. 1947 was rightly held by the High Court
to be not of the nature of revenue and accordingly not taxable.
·We exoress no opinion on the correctness of the finding of the
High Court that the interest accrued due after February 17. 1947,
must be regarded as income to the extent of the share of each of
i·
the members of the family.
The appeal fails and i.' dismissed with costs.
R.K.P.S.
Appeal dismissed.
ilJ 6J l.T.R. 458.