LexKALOORAM GOVINDRAM versus COMMISSIONER OF INCOMETAX, MADHYA PRADESH, NAGPUR
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A B c D E F G H KALOORAM GOVINDRAM v COMMISSIONER OF INCOMETAX, MADHYA PRADESH, NAGPUR Ap;il 5, 1965 [K. SUBBA RAo, J. c. SHAH AND s·. M. SIKRI, JJ.] Indian Income-tax Act, 1922 (11 of 1922), s. 10(2! '.'i-P""1titioo, of Hindu joint fami!y-Asset auctioned between dividing branc~es -Value on which depre(!iation to be allowed-Whether on auction price or on original cost to the erstwroile larger family. On partition being effected through a suit, a Hindu joint fami- ly who has only an interest in the entire joint family property_ ae>- family. The preliminary decree passed by the Court determmed 10/16 as the share of the appellant family and 6/16 as that of the other branch. Those assets of the erstwhile larger joint family which could not be physka!ly divided were auctioned between the two branches and in this manner a sugar mill was purchased for 34 lacs by the appellant family. In Income-tax proceedings depreciation under s. 10(2) (vi) of the Indian Income-tax Act, 1922 was claimed on the above valuation Qf 34 lacs. The claim was rejected by the In- come-tax Officer as well as the Appellate Assistant Commissioner. on the ground that the value for th,e purpose of depreciation was not the price determined at the family auction, but the original cost to erstwhile larger joint family. The Tribunal held that the 6/16 share of the other branch was purchased at the auction and its value had to be taken as the basis of the price determined at the auction, but the appellant family's own share of 10/16 was not purchased at the auction and therefore had to be valued at the original cost to the larger joint family. In reference, the High Court held that the distinc- tion made by the Tribunal was wrong and that the shares cxf both branches had to be valued on the basis of the original cost to the l<trger family. Appeal was filed before this Court with certificate. HELD: Per Subba Rao and Sikri, JJ. It may be that in strict legal theory partition may not involve a transfer, but the substance of the transaction is that an erstwhile member of a joint Hindu fami- ly who has only an interest in the entire joint family property ac- quires an absolute title to a specific property. The cost of the pro- perty to the member at the date of partition would be the value given to it for the purpose of allotment, provided it was real, or the price at which he purchased it in auction, or the value of it ascer- tained otherwise. [64'7A-C] In the case of assessees acquiring a property by purchase, gift, bequest, or succession, courts have held that the cost of the property to the assessee was not the original cost of it to his predecessor bu1 its actual cost to him at the time of the purchase, gift, bequest or succession. In substance there is no difference in the matter of ascer- taining the cost of an asset to an asses.see whether he is a donee, pur ... chaser, legatee, successor, or a divided member of" a joint Hindu family. [646D; 647A] Gil 6-12 SUPH.F.ME COUR'r REPORTS [1965] 3 s.c.n. Commissioner of Income-tax, Madras v. The Buckingham & Car- natic Company, Ltd., Madras (1935) 3 I.T.R. 384(P.C.), Jagata Coal Co. Ltd. v. Commissioner of Income-tax, West Bengal (1959) 36 I.T.R. A 521 (S.C.), Indian fron & Steel Co. Ltd. v. Commissioner of Income- ta.~. Bengal, (1943) 11 I.T.R. 328 (P.C.), Francis Vallabaravar v. Com- missioner of Income-tax, Madras (1960) 40 I.T.R. 426 and Com- missioner of Income-tax, Bombay v. Solomon & Sons (1933) 1.I.T.R. B 324, referred to. Commissioner of Income-tax, U.P. & C.P. v. Seth Mathuradas Mohta, (1939)7 I.T.R. 160, disapproved. In the present case the valuation given to the property was not notional but a real one; indeed the property was sold in the open auction between the members of the larger joint family and the value fetched thereunder entered into the scheme of partition. [647 C-DJ Therefore, even in respect of the appellant's own share of 10/16, the valuation for the purposes of s. 10(2) (vi) had to be on the basis of the price which the appellant bid at the auction. Per Shah, J. (dissenting). By the preliminary decree the appellant family became entitled to a 10/16th share in every item of the pro- perty of the larger joint family; the other branch tecame entitle to the remaining i.e. 6/16th share in each item. The appellant being al- ready owner of 10/16th share could not purchase the same at the auction. In substance the appellant
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