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Commissioner Of Income-Tax v. Bhim Chandra Ghosh
Factual and Procedural Background
This opinion arises from a reference made by the Appellate Tribunal at the instance of the Income-tax authorities seeking this Court's opinion on a specific question of law. The facts, as set out in the opinion, are: On 3 June 1917, one Dinanath Ghose executed an Arpannama dedicating certain self-acquired properties (described in Schedules 'Ka' and 'Kha') to two deities — identified in the document as Radha Shyam Jew Jugal Murti and a Narayan Sila called Sri Sri Sridhar Jew. The deed did not specify the share of each deity in the dedicated properties.
The procedural question for the Court was whether the Appellate Tribunal was correct in holding that the two deities took equal shares (i.e., tenancy in common with equal shares), and consequently that the proviso to Section 41 of the Income-tax Act (which permits tax at the maximum rate where shares of beneficiaries are indeterminate) did not apply. The Tribunal had earlier answered that the deities' shares were equal; this Reference asked the Court to opine on the correctness of that conclusion.
Legal Issues Presented
- Whether by the Arpannama the two deities took as joint beneficiaries with indeterminate shares (which would permit assessment at the maximum rate under the proviso to Section 41) or whether two separate estates (tenancies in common with determinate and equal shares) were created.
- Whether, as a matter of Hindu law and on the authorities cited, a Hindu can create a joint tenancy by a grant inter vivos or by will, and if not, whether a presumption of tenancy in common (equal shares) follows absent clear contrary intention.
Arguments of the Parties
Arguments Presented by Mr. Meyer
- Challenged the correctness of the proposition attributed to Pulin Behari De's case that a Hindu cannot create a joint tenancy by a grant inter vivos or by will.
- Contended that the Judicial Committee's pronouncement (that joint tenancy was unknown to Hindu law except in the undivided Mitakshara family) conflicts with earlier Privy Council statements recognising joint-tenancy-like interests in several inheritance situations (e.g., multiple daughters, multiple sons or grandsons succeeding to property, multiple widows succeeding to husband's estate), which had been described as in the nature of joint tenancies.
- Argued that even if the Privy Council's pronouncement were accepted, it should not necessarily apply to debuttor (debt-free dedicated) estates, where separate considerations might arise.
Arguments Reliant on Clause 5a of the Arpannama (as advanced on behalf of applicant/contesting party)
- It was contended that Clause 5a of the Arpannama — which permits the Sebait, in his discretion, to increase or reduce the scale of expenditure in case of surplus or deficit — gave the Sebait freedom to alter expenditure proportions between the two deities, thereby making the shares indeterminate and bringing the case within the proviso to Section 41.
- The applicant relied on Clause 5a as a potential indication that the donee (Sebait) could decide different levels of expenditure for each deity, which, if correct, would rebut the presumption of equal interest and render the shares indeterminate.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commr. of Income-tax v. Pulin Behary De, 20 ITR 314 | The Tribunal had held that where property is dedicated to two deities without specification of shares, the beneficiaries' shares are determinate (equal) and assessment should be on each respective income; the Court accepted that a Hindu cannot create a joint tenancy by grant inter vivos or by will (as stated by Harries, C.J. and Chatterjee, J.). | The Court treated this case as directly covering the central question and relied on its conclusion that the shares were defined in law (equal) where no shares were specified. The present decision follows Pulin Behary De's conclusion that tenancy in common (equal shares) is the presumption. |
| Commr. of Income-tax, W.B v. Sm. Ashalata Debi, 20 ITR 326 | Followed the decision in Pulin Behary De; cited as a subsequent instance where the same principle was applied. | The Court noted that this decision followed Pulin Behary De and treated it as supporting the presumption of determinate (equal) shares when no shares are specified. |
| Bahu Rani v. Rajendra Bakhsh Singh, 60 Ind App 95 : AIR 1933 PC 72 (Privy Council) | The Judicial Committee's pronouncement that the principle of joint tenancy as known in English law is unknown to Hindu law except in the case of joint property of an undivided Mitakshara family. | The Court cited this pronouncement as part of the authority relied upon in Pulin Behari De. The Court discussed whether the pronouncement must be accepted as an absolute proposition and observed it was unnecessary to resolve apparent tensions with earlier Privy Council statements for the present case. |
| Jogeswar Narain Deo v. Ram Chund Dutt, 23 Ind App 37 | Earlier statement reiterated by the Judicial Committee regarding the foreignness of English joint tenancy principle to Hindu law; used to support presumption against creation of joint tenancy by a Hindu grant. | The Court referenced this case as part of the line of authority asserting the limited role of joint tenancy in Hindu law and used it to justify the presumption that a grant by a Hindu does not create a joint tenancy absent clear intention. |
| Yethirajulu Naidu v. Mukunthu Naidu, ILR 28 Mad 363 | Observed (per Subrahmania Ayyar, J.) that when property is gifted to more than one, in absence of contrary indication the presumption is that the donees take as tenants in common. | The Court cited this Madras decision to support the proposition that the presumption is tenancy in common and that presumption can be rebutted only by clear indication. |
| Administrator-General of Madras v. Money, ILR 15 Mad 448 | Noted that the tendency of courts is to lean against joint tenancy (statement at p. 469). | The Court used this statement to reinforce the presumption against joint tenancy on grants by Hindus and to explain that only clearest indication would rebut that presumption. |
| Panchanan Das v. Commr. of Income-tax, W.B, 20 ITR 57 | Held that where an Arpannama permitted the Sebait to make modifications and alterations of the amounts specified for expenditure for different items (and thus vary amounts to be spent for the two deities), the shares could not be regarded as determinate. | The Court distinguished that case from the present one: Panchanan Das was cited as an example where discretion to vary amounts between deities rendered shares indeterminate; but the Court held Clause 5a in the present Arpannama did not confer such discretion to vary proportions between the two deities and so Panchanan Das was not applicable. |
Court's Reasoning and Analysis
The Court's analysis proceeded in ordered steps:
- The Court framed the central legal distinction: if the dedication created a joint gift with indeterminate shares, the proviso to Section 41 would permit taxation at the maximum rate; if it created two separate gifts (tenancy in common), the shares would be determinate (and here, in law, equal) and the proviso would not apply.
- The Court examined controlling authority, particularly Pulin Behari De, which held that where property is dedicated to two deities without specification of shares, the beneficiaries' shares are determinate (equal) and that a Hindu cannot create a joint tenancy by grant inter vivos or by will. The Court accepted that Pulin Behari De covered the present question.
- The Court recorded and engaged with the contention advanced by Mr. Meyer challenging that proposition — noting tensions between the Judicial Committee's later pronouncement (that joint tenancy is generally unknown to Hindu law except in Mitakshara joint family property) and earlier Privy Council statements that characterised certain hereditary interests as joint-tenancy-like. The Court explicitly declined to decide whether those authorities could be reconciled or whether they applied to debuttor estates, stating that resolving those wider doctrinal questions was unnecessary for the present case.
- The Court articulated a clear evidential presumption: even if one does not accept an absolute impossibility of a Hindu creating a joint tenancy, the law presumes a tenancy in common when property is granted to more than one. It stressed that only the clearest indication of contrary intention by the grantor would rebut that presumption (citing Yethirajulu Naidu and Administrator-General of Madras v. Money to support the presumption and the judicial tendency to lean against joint tenancy).
-
The Court then closely analyzed the text of the Arpannama:
- Clause 1 dedicates the properties "in their entirety" to the worship of the two deities.
- Clause 4 prescribes the Sebait's duty to arrange daily worship and to spend for worship and festivals "in accordance with" a prescribed schedule (Schedule 'Ga'); the Sebait shall not spend in excess of the estate income.
- Clause 5 requires the Sebait to execute repairs, maintain the Thakurbati, and pay rent, taxes, cess, etc., out of the income.
- Clause 5a allows the Sebait, in case of surplus or deficit, to increase or reduce the scales of expenditure in his discretion.
- The Court examined the schedules (which were not printed in the Paper Book but produced in original) and found that the schedule of expenditure sets out common festival items and common daily Deb Seba items that apply to both deities. The Court reasoned that the absence of mention of separate shares or earmarking gave no basis to think the executant intended to leave distribution to the Sebait's unfettered choice; rather, it was more reasonable to infer the executant intended equal devotion and equal expenditure for both deities.
- The Court interpreted Clause 5a narrowly. Rather than meaning that the Sebait could shift proportions of expenditure between the two deities at will, the Court read Clause 5a as permitting the Sebait to increase or decrease the scales of expenditure applicable to either deity's share in case of surplus or deficit in that deity's income. Thus, the clause did not demonstrate an intention to create a joint estate or to make shares indeterminate.
- The Court distinguished Panchanan Das (where the Sebait's discretion to vary amounts for the two deities was held to make shares indeterminate) on the ground that, in the present Arpannama, Clause 5a did not confer the right to alter amounts between the two deities.
Holding and Implications
Holding: The Court answered the Reference in the affirmative — it held that the Income-tax Tribunal was correct in concluding that the two deities took equally under the Arpannama and that, with their shares thus defined (equal and determinate), there was no scope for assessment at the maximum rate under the proviso to Section 41.
Implications:
- Direct effect: The Tribunal's finding that the deities' shares were equal and determinate stands affirmed; consequently, taxation at the maximum rate under the proviso to Section 41 is not applicable in this case.
- Costs: The assessee is entitled to the costs of the Reference.
- Precedential scope: The Court did not pronounce a new rule overruling prior authorities. It followed Pulin Behari De and related authorities, emphasized the strong presumption in favour of tenancy in common on a Hindu grant to multiple beneficiaries, and indicated that only a clear intention to create a joint estate will rebut that presumption. The opinion expressly avoided deciding broader tensions among Privy Council authorities or the full doctrinal reach regarding debuttor estates.
Other notes from the opinion: Justice Guha agreed with Das Gupta, J.'s opinion. The formal statement at the end records "Answered in the affirmative."
Das Gupta, J.:— This is a reference made by the Appellate Tribunal at the instance of the Income-tax authorities for the opinion of this Court on a question which is formulated in these words: Whether in the facts and circumstances of the case the Tribunal were right in holding that under the endowment the two deities took equally and that their shares being thus defined there was no scope for an assessment at the maximum rate. One Dinanath Ghose executed an Arpannama on 3-6-1917 boy which he dedicated to the two deities, one of which is Radha Shyam Jew Jugal Murti and the other a Narayan Sila called Sri Sri Sridhar Jew, properties mentioned in Schs. ‘Ka’ and ‘Kha’ of the document. He did not specify the shares which each of the deities was to get in these properties. If the gift was a joint gift to the two deities with the share of each indeterminate, the income receivable by each of the deities would be indeterminate and under the proviso to Section 41 of the Income-tax Act tax was leviable and recoverable at the maximum rate at the relevant date. If, however, the dedication amounted to two separate gifts to the two deities, the necessary conclusion from the absence of specification of shares of each would be that each of the two deities would have an equal share in the properties so that the income receivable would be determinate and the proviso would not apply. The question is whether by the dedication a joint estate was created in favour of the two deities or two separate estates were created. The question is covered by the authority of this Court's decision in — ‘Commr. of Income-tax v. Pulin Behary De’, 20 ITR 314 (A). In that case there was also dedication to two deities Thakur Harihar and Thakurani Sachimata without specification of shares and earmarking of any sum for the religious expenses in each case. The Tribunal held that the individual shares of the beneficiaries were determinate and the assessment should have been made on each separate and respective income. A case was stated on the question whether the Appellate Tribunal was right in holding that although the shares of the two deities were not defined in the deed of endowment, their shares were defined in law, that is, they were equal and, therefore, the first proviso to S. 41 is inapplicable. In this Court Harries, C.J and Chatterjee, J., held that the Tribunal had arrived at a correct conclusion and answered the question in the affirmative. This decision was followed by this Court in the subsequent case of — ‘Commr. of Income-tax, W.B v. Sm. Ashalata Debi’, reported in the same volume of ITR at p. 326 (B). In — ‘Pulin Behari De's case (A), Harries C.J, with whom Chatterjee, J., agreed, relying mainly on the pronouncement of the Judicial Committee in the Privy Council in — ‘Bahu Rani v. Rajendra Bakhsh Singh’, 60 Ind App 95 : (AIR 1933 PC 72) (C), reiterating what they have stated earlier in ‘Jogeswar Narain Deo v. Ram Chund Dutt’, 23 Ind App 37 (D), that the principle of joint tenancy as known to English law was unknown to Hindu law except in the case of the joint property of an undivided Hindu family governed by Mitakshara held that a joint tenancy cannot be created by a Hindu either by a grant inter vivos or by a will.
2. If this decision that a Hindu cannot create a joint tenancy at all by a grant inter vivos or by a will be a correct proposition of law, the necessary conclusion must be that in the present case also the Tribunal has by holding that a tenancy in common came into existence so that the shares of the two deities were equal and determinate came to a correct conclusion. Mr. Meyer, however, tried to convince us that the proposition of law as laid down in ‘Pulin Behari De's case (A) that a joint tenancy cannot be created by a Hindu either by a grant inter vivos or by a will is not a correct proposition of law. He has first contended that the pronouncement of the Judicial Committee that the principle of joint tenancy was unknown to Hindu law except in the case of the joint property of an undivided Hindu family governed by Mitakshara was itself irreconcilable with numerous statements of the law by the Privy Council itself that the interests of two or more daughters succeeding as heirs to their father, two or more sons, grandsons or great grandsons succeeding as heirs to the self-acquired property of a paternal ancestor, two or more grandsons of a daughter who are living as members of a joint family succeeding as heirs to the maternal grandfather and two or more widows succeeding as heirs to the estate of their husband were in the nature of joint tenancies. He further contended that in any case the pronouncement of the Privy Council was not and could not be intended to apply to the creation of debuttor estates where altogether separate considerations arise. It seems to me unnecessary in the present case to decide whether or not the statements of the law by the Privy Council in ‘Jogeswar Narain Deo's case (D)’, and repeated in more definite terms in ‘60 Ind App 95 : (AIR 1933 PC 72) (C)’, can be reconciled with the earlier statements of law as regards the existence of other joint tenancies in addition to the joint property of the undivided Hindu family nor whether the statements should be held inapplicable to the debuttor estates. It may be mentioned, however, that even if the statement of law that the principle of joint tenancy is unknown to Hindu law except in the case of the joint property of an undivided Hindu family governed by Mitkashara be taken to be fully consistent with the earlier statement of the law and also applicable to debuttor estates it would not necessarily follow that such an estate could not be created by a Hindu by a grant. It is important to mention in this connection that in — ‘Yethirajulu Naidu v. Mukunthu Naidu’, ILR 28 Mad 363 (E), where Sir Arnold White, C.J, and Subrahmania Ayyar, J., had to consider the question whether by bequest of a house in favour of the sons the sons took it as tenants in common or joint tenants, Subrahmania Ayyar, J., observed at p. 373 of the Reports:
“The decision of the Judicial Committee in — ‘Jogeswar Narain Deo v. Ram Chand Dutt’, (D), points out that the principle of joint tenancy as obtaining in England is quite foreign to the Hindu Law and that, when property is gifted to more than one, in the absence of anything in the grant to the contrary the presumption is that the donees take as tenants in common.”
3. It seems to me that much can be said in favour of the view taken in the above case that it is not right to base on the pronouncement of the Privy Council mentioned, above that no Hindu can create a joint estate in favour of two persons, but that such an interest being ordinarily unknown to Hindu law a grant by a Hindu should be presumed not to have created a joint estate but that presumption can be rebutted by a clear indication of an intention of the grantor to create a joint estate. Assuming that we agree with Mr. Meyer that the proposition of the law as stated in — ‘Pulin Behari De's case (A)’, that a Hindu cannot by a grant create a joint estate should not be accepted as correct, I do not think it can be doubted for a moment that the presumption is in favour of a tenancy in common and only the clearest indication of a contrary intention will justify that a joint estate was created. Mention may be made in this connection of the case of — ‘Administrator-General of Madras v. Money’, ILR 15 Mad 448 (F), where it was said at p. 469 that “the general result of the authorities seems to be that the tendency of the Court is to lean against joint tenancy”. If this was a correct statement of the law, as in my opinion it was, at that time, the consequence of the pronouncement of the Judicial Committee that the idea of a joint tenancy was unknown to Hindu law would certainly be that there would be a very strong presumption in the case of a grant by a Hindu that he did not intend to create a joint tenancy and that it is only on the clearest indication of an intention to create a joint tenancy that the above presumption can be rebutted.
4. Turning now to the Deed of Endowment we find that in the first clause the executant says that
“for the worship etc., of the above-mentioned deities installed by me, I dedicate to them, in their entirety, my self acquired properties described in Schs. ‘Ka’ and ‘Kha’ below.”
In Cl. 4 he says:
“The Sebait, by appointing qualified Brahmins, shall arrange for the daily worship of the said deities and for such worship and for festivals like Rasjatra, Doljatra and Jhulanjatra etc., he shall make expenditure in accordance with the provisions of Sch. ‘Ga’ hereto. He shall be entitled to purchase from time to time, as and when necessary, utensils and other requisites for the worship of the said deities, articles such as mattresses, bedding, lights etc., for the Thakurbati and other things as may be required for the Thakurbati or the deities. But he shall not be entitled to spend on any account in excess of the income of the estate.”
In Cl. 5 he states:
“Out of the income of the properties mentioned in this Arpannama, the Sebait shall execute proper repairs of the houses of the deities, keep the Thakurbati clean and pay regularly such rent, taxes and cess etc., as may be payable on account of the Debutter properties.”
Then comes Cl. 5a on which much reliance has been placed on behalf of the applicant. It is in these words:
“If there be any surplus of the income of the Debutter properties after expenditure in accordance with the provisions of this Arpan-nama has been made, the Sebait shall be entitled to increase in his discretion the scales of expenditure laid down in Sch. ‘CA’ and he shall similarly be entitled to reduce the said scales, in case there is a deficit.”
The copy of the Deed of Endowment which is printed in the Paper Book does not contain the schedules. The original document was, however, produced before us and we have examined with the assistance of the learned Advocates these schedules. Schedules ‘Ka’ and ‘Kha’, as already indicated describe the properties. Schedule ‘Ga’ which mentions the scale of expenditure provides different sums of money for the festivals mentioned in para 1 thereof, the total of these sums being Rs. 470/- and fixes for the daily Deb Seba specified amounts of rice, flour, ghee, milk and also sets out the monthly expenses on account of oil, salt, pulse, spices, vegetables, sweets and daily lighting, salary of one Brahmin priest, salary of one Brahmin cook, salary of one servant and salary of one maid servant. Except that it is not clear to us what the birth anniversary of Iswar Shyamsundar Jew refers to, it is abundantly clear that all the festivals referred to in para 1 and the items of expenditure mentioned in para 2 are common to two deities. The fact that the shares for each deity are not mentioned herein gives no reason to think that the executant had left it to the Sebait to distribute the amounts in the way he pleased. It seems much more reasonable to think that the devotion of the executant of the Arpannama was the same for both the deities installed by him and that his intention was that the Sebait would spend equal sums for the festivals for these two deities. The scale of expenditure as mentioned in the schedule is therefore of no assistance to rebut the presumption that the intention was to create a tenancy in common.
5. It is contended, however, that Cl. 5a of the Arpan-nama gives clear indication that the Sebait was left free to alter the expenditure. If on a correct interpretation of Cl. 5a it appeared to us that by this the Sebait was given the right to alter the proportion of expenditure between the two deities and was free to spend less for one deity and more for another deity as he pleased, the argument would require serious consideration. It appears to me, however, that Cl. 5a cannot be properly interpreted in that manner. The presumption being that the intention of a Hindu is to create equal interest in favour of the two deities, to whom the dedications are made, it would be proper to interpret the provisions of Cl. 5a to mean that if there be any surplus of the income of the Debutter properties in the share of either deity, then the Sebait shall be entitled to increase in his discretion the scales of expenditure for that deity and similarly if there is a deficit in the income of the properties in the name of either deity, he shall be entitled to reduce the expenditure for that deity. Interpreted thus Cl. 5a cannot be said to indicate any intention to create a joint estate in favour of the two deities. In — Panchanan Das v. Commr. of Income-tax, W.B’, 20 ITR 57 (G), there was a provision in the Arpan-nama that the Sebait for the time being shall be able to make modifications and alterations of the amounts specified in the document for expenditure on different items according to his discretion and according to the times. In that case Harries, C.J and Banerjee, J., held that as the Sebait was entitled to vary the amounts to be spent for the two deities, the shares of the deities could not possibly be regarded as determinate.
6. That decision is of no assistance in the present case as here, as I have pointed out above, Cl. 5a of the Arpan-nama does not give the Sebait a right to alter the amounts as between the two deities.
7. I have, therefore, come to the conclusion that the decision of the Income-tax Tribunal that the two deities took equally and that their shares being thus defined there was no scope for assessment at the maximum rate was correct and that the answer to the question stated should be in the affirmative.
8. The assessee is entitled to the costs of this Reference.
9. Guha, J.:— I agree.
V.B.B
10. Answered in the affirmative.
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