LexCOMMISSIONER OF INCOME-TAX, MADRAS versus RN. AR. AR. VEERAPPA CHETTIAR
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A B c D E F G 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 re- ceived 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 asses- sce'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 " .. .~.,"'f,:--;---:-··~ ;\_ ~ ., \ ~\ ·:.; ~ ...... \ ' ~ - - ·- SUPREME COURT REPORTS ·' . ' . [1970] 3 S.C.R. ---~-,--·-- "' -~ j • . CIVIL APPELLATE JURISDICTION : Civil Appeal 'No. 2315 of ,1966. . . . . • ~ . Appeal from the judgment and order, dated August 25, 1965 <>f the Madras High Court in Tax Case No. 216 of 1962 (Re- ference 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
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