Case Note & Summary
The appeal before the Supreme Court arose from a reference made under Section 66(1) of the Income Tax Act, 1922 by the Income Tax Appellate Tribunal, Madras, to the Madras High Court. The assessee, T. S. Srinivasan, was the youngest son of T. V. Sundaram Ayyangar, the Karta of a Hindu undivided family. Following a partial partition of that family, the assessee received 25 shares of Rs. 1,000 each in T. V. Sundaram Iyengar and Sons Limited as his share. Using these shares as nucleus, he acquired house properties, shares, and deposits up to March 31, 1952. He was also employed as Service Manager of the same private limited company and earned substantial remuneration. His first son, Venugopal, was born on December 11, 1952, and conception had occurred sometime in March 1952. For the assessment year 1952-53, the assessee was assessed as an individual on all sources of income. For the assessment year 1953-54, accounting year April 1, 1952 to March 31, 1953, the assessee claimed that all income except salary should be assessed in the hands of a Hindu undivided family consisting of himself and his son, asserting that the HUF came into existence in March 1952 when the son was conceived. The Income Tax Officer, while accepting that a male child acquires coparcenary rights from conception, held that this principle applied only inter se family members and not against the State; therefore, the family was recognized only from the date of birth, December 11, 1952. The Appellate Assistant Commissioner and the Income Tax Appellate Tribunal upheld this view. On reference, the Madras High Court answered the question against the assessee, confirming that assessment as an individual till December 11, 1952 was valid. The assessee appealed to the Supreme Court by certificate. The main legal issue was whether a Hindu undivided family comes into being on conception or on birth for purposes of Section 3 of the Income Tax Act, 1922, and whether the pre-birth income was assessable as individual income. The assessee, through counsel A. V. Viswanatha Sastri, argued that the Act treats an HUF as a separate unit but does not define when it comes into existence; therefore, Hindu law principles must apply. Under Hindu law, a son conceived has the same rights of property as a living son, and a joint Hindu family comes into existence from the date of conception. The Revenue, represented by the Attorney-General, argued that the doctrine of son conceived is not of universal application and applies only to safeguard the son's property rights. The Act is concerned with visible realities, and until birth the only visible person was the assessee. Applying the doctrine would create anomalies in filing returns and assessment. The Supreme Court, relying on C.B.C. Deshmukh v. I. Mallapa Chanbasappa, AIR 1964 SC 510, held that the doctrine is not of universal application and had been refused extension to adoption. The Court reasoned that the doctrine does not fit the scheme of the Income Tax Act. Section 3 charges income of every individual, HUF, company, local authority, firm, and association of persons. Section 4 includes income accruing or arising or deemed to accrue or arise to a person in taxable territories. Income can accrue day-to-day, and there would be uncertainty if one could not know at a particular time to which entity income is accruing. Section 22 required the Income Tax Officer to issue notices for returns, and the prescribed form for an HUF required particulars of members at the end of the previous year, including names, relationship, and age. An unborn son cannot have a name or age, making it impracticable. The Court also noted that income tax is a liability and the legislature could not have intended to impose a liability on unborn persons. The assessee's alternative argument that status at the end of the accounting year should determine the assessment for the whole year was not allowed as it was raised for the first time. Even if an HUF was in existence towards the end of the accounting year, the whole income of the year did not become HUF income; until the child was born, the income was the assessee's individual income. The Supreme Court therefore held that the HUF came into existence only on the birth of the son on December 11, 1952, and the assessment of income as individual till that date was valid. The appeal was dismissed.
Headnote
A) Income Tax - Assessable Entity - Hindu Undivided Family - Income Tax Act, 1922, Section 3 - The issue was whether an HUF came into existence upon conception of a son or only upon birth for income tax assessment. The Court held that the Hindu law doctrine that a son conceived is equal to a son born is not of universal application and applies mainly for determining rights to property and safeguarding such rights; it does not fit the scheme of the Income Tax Act because income tax liability cannot be imposed on unborn persons and the Act's return forms contemplate members existing at the end of the previous year. Therefore, the assessee's income was rightly assessed as individual income until the son's birth on 11 December 1952. (Pages 755-760) B) Income Tax - Accrual of Income - Section 4, Income Tax Act, 1922 - Income Accrues to Visible Person - Income can accrue or arise day-to-day; until the child was born, the only visible person to whom income accrued was the assessee. The Court reasoned that a Hindu undivided family could not be recognized as an assessable entity before birth because the Act is concerned with realities and avoids uncertainties. (Pages 758-760) C) Income Tax - Return Filing Requirements - Section 22, Income Tax Act, 1922 - Prescribed Form Part IIIA - The prescribed return form for an HUF required names, relationship, and age of members at the end of the previous year. An unborn son cannot have a name or age, making it impossible for an assessee to file a return as HUF before birth. The Court found this difficulty demonstrates Legislature did not intend to incorporate the Hindu law doctrine. (Pages 759-760) D) Hindu Law - Doctrine of Son Conceived - Rights of Property - C.B.C. Deshmukh v. I. Mallapa Chanbasappa, AIR 1964 SC 510 - The Court relied on the precedent that the doctrine is not of universal application and was not extended to adoption. The doctrine evolved for secular purpose of securing son's share in family property and cannot be applied to determine an HUF's coming into being as an assessable entity under the Income Tax Act. (Pages 758-759) E) Income Tax - Alternative Argument of Status at End of Accounting Year - Assessment Year 1953-54 - The assessee alternatively argued that if HUF was in existence at the end of the accounting year (since the child was born on 11 Dec 1952), the whole year's income should be assessed as HUF. The Court held that even if an HUF existed towards the end of the accounting year, the whole income received or accrued in the accounting year did not thereby become the assessable income of the HUF; till the child was born, income was the assessee's individual income. (Pages 760)
Issue of Consideration
Whether a Hindu undivided family comes into existence on conception of a son or on birth for purposes of Section 3 of the Income Tax Act, 1922; and whether the assessment of the assessee's income (other than salary) as individual income till 11 December 1952 for assessment year 1953-54 was valid.
Final Decision
The Supreme Court held that the Hindu undivided family came into existence only upon the birth of the son on 11 December 1952, and that the income received or accrued during the accounting year before that date was assessable as the individual income of the assessee. The assessment as individual till 11 December 1952 was valid. The appeal was dismissed.
Law Points
- Legal points not extracted
- Hindu law doctrine that a son conceived is equal to a son born is not of universal application
- doctrine applies mainly for determining rights to property and safeguarding such rights
- doctrine does not fit scheme of Income Tax Act
- 1922
- income tax liability cannot be imposed on unborn persons
- assessable entity under Section 3 must be a visible reality
- HUF comes into existence for income tax purposes only on birth of son
- even if HUF existed at end of accounting year
- pre-birth income remains individual income
- prescribed return form for HUF requires names and ages of members existing at end of previous year
