Earlier this month, Supreme Court in a historic three-member bench judgment, Vineeta sharma vs Rakesh Sharma [TS-5061-SC-2020-O], clarified the scope of inheritance by a female of HUF property. Considering HUF as a valuable tool for tax purposes, S. Ramanujam (Chartered Accountant), in his article, extensively dwells on this recent SC ruling and attempts to “highlight some important facets of the judgment and how one can relook at certain outdated notions which denied in the past the inheritance rights to a daughter.”

Outlining some important extracts from the judgment, the author refers to SC conclusion “The provisions contained in substituted Section 6 of the Hindu Succession Act, 1956 confer status of coparcener on the daughter born before or after amendment in the same manner as son with same rights and liabilities.” The author then dwells on some ‘Questions & Answers’ in the context of the SC Judgment. The author sheds some light on how to create a HUF property and whether married women can have a share in the bigger HUF belonging to her parents as a coparcener by virtue of the present judgment and simultaneously also as a member in her husband’s HUF.

Scope of inheritance by a female of HUF property

Introduction:

For many, especially for tax-paying assesses, a Chartered accountant is a one stop, preliminary guide for all regulatory changes occurring in respect of many laws and he performs / fulfils the role, akin to a family doctor advising on current ailments of the patients. His views are always given weightage, though many times the view expressed by him are not accepted by the Courts. In the National Tax Tribunal judgment [TS-600-SC-2014-O], the SC categorically ruled that when interpretation of many laws like Partnership Act, Indian Trust Act, HUF law, etc., which have an impact on the taxable income is to be made, the correct and harmonious interpretation can be done only by a lawyer and not by a CA. In fact the SC as an appendix to the judgment illustrated a list of important case laws of this nature, crediting the legal fraternity for settling these issues once for all. However having worked with big-time consultants in the past, the author also believes that many a time the original idea always erupts when the computation is made by the CA of income tax liability to be forked out, which triggers other ways of legal mitigation of the tax liability. The tax planning or new tax interpretation, in an earnest way, begins at that time!

Huge literature is available on the subject of taxation of HUF as a legal entity and how one can create for instance, a separate file for an HUF entity, and how the individual now can put on an additional hat as a karta (head) of HUF. Though conceptually, a lawyer trained under the Hindu law can clarify many aspects of this ancient law, the tax advantages could always be known and obtained mainly from a CA specialised in dealing with Income Tax Act. The definition of ”person” which includes HUF as a legal assessable entity dates back its roots to 1922 Income Tax Act and hence one cannot brush aside this as an irrelevant tax concept (some Q&A are provided at the end of this article about the way an accountant will approach this subject).

Stepping away from this subject - HUF as a valuable tool for tax purposes, let us examine what the SC has recently pronounced in this historic three-member bench judgment reported in [TS-5061-SC-2020-O] which clarified the scope of inheritance by a female of HUF property. In this historic judgment, the SC clarified the scope of amendment to Hindu Succession Act made in 2005 by recounting all the important judgments delivered till date on this particular issue and also in the process reversed / modified two other recent judgements of the same court. In this short article, an attempt is made to highlight some important facets of the judgment and how one can relook at certain outdated notions which denied in the past the inheritance rights to a daughter.  

Hindu Succession Act and the genesis of many litigations:

The Hindu Succession Act, 1956, was enacted to amend and codify the law relating to intestate succession. The Act applies to Hindus, Buddhists, Jains and Sikhs. Section 4 of the Act, clearly provides that this Act overrides any interpretation of Hindu law or any custom before the commencement of the Act. It is also clarified in another judgment that the Act has no extraterritorial operation and operates to control and govern the succession of a property of a Hindu situated within the territories of India by a Hindu. The Act has only 30 sections and some definitions too are very unique (not common usage expressions). For instance, ”intestate” is defined in sec 3(g) as under: “A person is deemed to die intestate in respect of property of which he or she has not made any testamentary disposition capable of taking effect. Similarly, there are definitions of words such as ”agnate”, cognate”, ”full-blood”, “half-blood”, “uterine-blood”, “heir”, “related”, etc. All these definitions are fully discussed in many judgments and makes interesting reading and are not extracted here.

Amendment to section 6 of the Hindu Succession Act:—2005: Statement of Objects and Reasons for the proposed amendment:”

…..The Act originally provided that in the case of Mitakshara coparcenary property, females cannot inherit in ancestral property as their male counterparts do. This law by excluding the daughter from participating in the coparcenary ownership not only contributes to the discrimination on the ground of gender but also led to oppression and negation of her fundamental right of equality guaranteed by the Constitution.

………

It is proposed to remove the discrimination as contained in section 6 of the Hindu Succession act by giving equal rights to daughters in the Hindu Mitakshara coparcenary property as the sons have. Section 23 of the Act disentitles a female heir to ask for partition in respect of a dwelling house wholly occupied by a joint family until the male heirs choose to divide their respective shares therein. It is also proposed to omit the section so as to remove the disability on female heirs contained in that section.”

In accordance with the above reasoning, section 6 of the Act was amended.( This section is not   extracted: )

Some extracts from the judgment:

• A joint Hindu family is a larger body than a Hindu coparcenary. A joint Hindu family consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. A joint Hindu family is one in worship and holds joint assets. After separation of assets, the family ceases to be joint.
• Hindu coparcenary is a much narrower body. It consists of propositus and three lineal descendants. Before 2005, it included only those persons like sons, grandsons, and great-grandsons who are the holders of joint property. For example, in case A is holding the property, B is his son, C is his grandson, D is great-grandson, and E is a great-great-grandson. The coparcenary will be formed up to D, i.e. great-grandsons, and only on the death of A, holder of the property, the right of E would ripen in coparcenary as coparcenary is confined to three lineal descendants. Since grandsons and great-grandsons become coparceners by birth, they acquired an interest in the property.
• Coparcenary property is the one which is inherited by a Hindu from his father, grandfather, or great-grandfather. Property inherited from others is held in his rights and cannot be treated as forming part of the coparcenary. The property in coparcenary is held as joint owners.
• Coparcener heirs get right by birth. Another method to be a coparcener is by way of adoption. As earlier, a woman could not be a coparcener, but she could still be a joint family member. By substituted section 6 with effect from 9.9.2005 daughters are recognised as coparceners in their rights, by birth in the family like a son. Coparcenary is the creation of law. Only a coparcener has a right to demand partition. Test is if a person can demand a partition, he is a coparcener not otherwise. Great- great -grandson cannot demand a partition as he is not a coparcener. In a case out of three male descendants, one or other has died, the last holder, even a fifth descendant, can claim partition. In case they are alive, he is excluded.
• For interpreting the provision of section 6, it is necessary to ponder how coparcenary is formed. The basic concept of coparcenary is based upon common ownership by coparceners. When it remains undivided, the share of the coparcener is not certain. Nobody can claim with precision the extent of his right in the undivided property. Coparcener cannot claim any precise share as the interest in coparcenary is fluctuating. It increases and diminishes by death and birth in the family.
• Unobstructed heritage takes place by birth and the obstructed heritage takes place after the death of the owner. It is significant to note that under section 6, by birth, right is given that is called unobstructed heritage. It is not the obstructed heritage depending upon the owner's death. Thus, coparcener father need not be alive on 9.9.2005, date of substitution of provisions of Section 6.
• The prospective statute operates from the date of its enactment conferring new rights. The retrospective statute operates backward and takes away or impairs vested rights acquired under existing laws. A retroactive statute is the one that does not operate retrospectively. It operates in futuro. However, its operation is based upon the character or status that arose earlier. Characteristic or event which happened in the past or requisites which had been drawn from antecedent events. Under the amended section 6, since the right is given by birth, that is an antecedent event, and the provisions operate concerning claiming rights on and from the date of Amendment Act.
• Retrospective law, means a law which looks backward or contemplates the past; one which is made to affect acts or facts occurring, or rights occurring, before it came into force. Every statute which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability in respect to transactions or considerations already past. Retroactive statute means a statute which creates a new obligation on transactions or considerations already past or destroys or impairs vested rights.
• The effect of the amendment is that a daughter is made coparcener, with effect from the date of amendment and she can claim partition also, which is a necessary concomitant of the coparcenary. Section 6(1) recognises a joint Hindu family governed by Mitakshara law. The coparcenary must exist on 9.9.2005 to enable the daughter of a coparcener to enjoy rights conferred on her. As the right is by birth and not by dint of inheritance, it is irrelevant that a coparcener whose daughter is conferred with the rights is alive or not. Conferral is not based on the death of a father or other coparcener. In case living coparcener dies after 9.9.2005, inheritance is not by survivorship but by intestate or testamentary succession as provided in substituted section 6(3).
• As per the Mitakshara law, no coparcener has any fixed share. It keeps on fluctuating by birth or by death. It is the said principle of administration of Mitakshara coparcenary carried forward in statutory provisions of section 6. Even if a coparcener had left behind female heir of Class I or a male claiming through such female Class I heir, there is no disruption of coparcenary by statutory fiction of partition.
• No uncertainty is brought about by the provisions of section 6 as the law of Mitakshara coparcenary makes the share of surviving coparceners uncertain till actual partition takes place. Uncertainty in the right of share in a Mitakshara coparcenary is inhered in its underlying principles, and there is no question of upturning it when the daughter is treated like a son and is given the right by birth; to be exercised from a particular date, i.e., 9.9.2005. Itis not to resurrect the past but recognising an antecedent event for conferral of rights, prospectively..
• ”Partition” is a redistribution or adjustment of pre-existing rights, among co-owners/coparceners, resulting in a division of lands or other properties jointly held by them into different lots or portions and delivery thereof to the respective allottees. The effect of such division is that the joint ownership is terminated and the respective shares vest in them in severalty.
• A partition of a property can be only among those having a share or interest in it. A person who does not have a share in such property cannot obviously be a party to a partition.
• “Separation of share” is a species of ”partition”. When all co-owners get separated, it is a partition. Separation of share(s) refers to a division where only one or only a few among several co-owners / coparceners get separated, and others continue to be joint or continue to hold the remaining property jointly without division by metes and bounds. For example, where four brothers owning a property divide it among themselves by metes and bounds, it is a partition. But if only one brother wants to get his share separated and other three brothers continue to remain joint, there is only a separation of the share of one brother.
• It is only the share of the deceased coparcener and his heirs are ascertained under the Explanation to section 6 and not that of other coparceners, which keep on changing with birth and death. If a daughter is alive on the date of enforcement of the Amendment Act, she becomes a coparcener with effect from the date of the Amendment Act, irrespective of the date of birth earlier in point of time.
• Section 6 is to ensure that daughters are not deprived of their rights of obtaining share on becoming coparcener and claiming a partition of the coparcenary property by setting up the frivolous defence of oral partition and/or recorded in the unregistered memorandum of partition. The Court has to keep in mind the possibility that a plea of oral partition may be set up, fraudulently or in collusion, or based on unregistered memorandum of partition which may also be created at any point of time. Such a partition is not recognized under Section 6(5).
• There is a general presumption that every Hindu family is presumed to be joint unless the contrary is proved. It is open even if one coparcener has separated, to the non separating members to remain joint and to enjoy as members of a joint family. No express agreement is required to remain joint. It may be inferred from how their family business was carried on after one coparcener was separated from them.
• The protection of rights of daughters as coparcener is envisaged in the substituted Section 6 of the Act of 1956 recognises the partition brought about by a decree of a court or effected by a registered instrument. The partition so effected before 20.12.2004 is saved.

(i) The provisions contained in substituted Section 6 of the Hindu Succession Act, 1956 confer status of coparcener on the daughter born before or after amendment in the same manner as son with same rights and liabilities.

(ii) The rights can be claimed by the daughter born earlier with effect from 9.9.2005 with savings as provided in Section 6(1) as to the disposition or alienation, partition or testamentary disposition which had taken place before 20th day of December, 2004.

(iii) Since the right in coparcenary is by birth, it is not necessary that father coparcener should be living as on 9.9.2005.

(iv) The statutory fiction of partition created by proviso to Section 6 of the Hindu Succession Act, 1956 as originally enacted did not bring about the actual partition or disruption of coparcenary. The fiction was only for the purpose of ascertaining share of deceased coparcener when he was survived by a female heir, of Class I as specified in the Schedule to the Act of 1956 or male relative of such female..

Some Questions& Answers by the author in the context of the SC Judgment :

1. An HUF does not have any property. How to create a HUF property?

The answer to the question is dealt in the following case laws: Refer [TS-5240-HC-1981(Madras)-O] approved in [TS-5118-SC-1997-O]

Extract from [TS-5240-HC-1981(Madras)-O]

The legal position is summed up in the following passage in Mayne's Hindu Law, 11th Edn., as follows:

“Property may be joint property without having been ancestral. Where the members of a joint family acquire property by or with the assistance of joint funds or by their joint labour or in their joint business or by a gift or a grant made to them as a joint family, such property is the coparcenary property of the persons who have acquired it, whether it is an increment to ancestral property, or whether it has arisen without any nucleus of ancestral property. And it makes no difference that the form of the conveyance to them would make them tenants-in-common and not joint tenants. For the formation of a coparcenary under Hindu law, a nucleus of property which has come down to the father from his father, grandfather or great grandfather is not necessary, provided the persons constituting it stand in the relation of father and son or any other relationship requisite for a coparcenary."

To put it in simple words—HUF property can be created in many ways- a partition of larger HUF property, devolution of coparcenary interest who dies intestate, through a WILL, receipt of Gifts, throwing individual property into HUF property, etc.

(The author during his formative years has seen many HUF files are created by the method of gift / through Will especially during his stay in Gujarat.)

2. Whether the SC judgment is applicable even in respect of women born before 1956 and living as of today and the brothers still enjoying the ancestral property to the exclusion of them?

In the author’s view, the preamble of the Hindu succession Act, 1956, as also of Sec 4 of the Act (discussed in the introduction) clarifies the position that the law is applicable retroactively and the only criteria is the existence of HUF property as on 09-09-2005. Thus even today, any female members born before 1956 can claim a share subject to what is stated above.

3. Whether married women can have a share in the bigger HUF belonging to her parents as a coparcener by virtue of the present judgment and simultaneously also as a member in her husband’s HUF? (smaller HUF)

Answer is YES; as the two capacities are different—one as the Coparcener of bigger HUF and the other as member of smaller HUF.

4. Case study: Since the law is retroactive, if a Karta has died in 1980 and other siblings (consisting of 3 sisters and 2 brothers and the mother) have lived beyond 2005, what will be the share of each person?

Answer: Since the Karta has died in 1980, one has to apply the unamended section 6, according to which his share will go to others as survivorship upon the surviving members of the coparcenary. First assumption is to be made by counting all persons shares including the person who died (Total 7). One-seventh share of the deceased person will be distributed to others. Total share for each person will be one sixth of original share plus one seventh of one-sixth of the deceased persons share.

Thus one can go on multiplying the illustrations but suffice to end, by recognising the fact old notions have to be permanently erased from ones mind altogether, in the aftermath of this SC verdict.

Conclusion: In one place, the SC judgment refers to daughters by quoting an extract from another judgment as under:

Savita Samvedi (Ms) & Anr. v.Union of India & Ors., 1996 (2) SCC 380, thus:

“A common saying is worth pressing into service…“A son is a son until he gets a wife. A daughter is a daughter throughout her life.”…The eligibility of a married daughter must be placed on a par with an unmarried daughter (for she must have been once in that state),...to claim the benefit……(Otherwise, it would be) unfair, gender-biased and unreasonable, liable to be struck down under Article 14 of the Constitution. …It suffers from twin vices of gender discrimination inter se among women on account of marriage."

One cannot end this  article without recalling the above  statement—which also coincides with the PM’s slogan on the girl child!

Aside, one can also make many comments in a lighter vein when one looks at many other sections of the Hindu Succession Act—sec 18—full blood preferred over half blood, a cluster of words—son, grandson, great-grandson accountable for the dues of the father, grandfather or great-grandfather on account of pious obligation (prior to the amendment Act of 2005) etc. The author is of the view that if this part of section 6 would have been known to the legal heirs, no one would have claimed the property inherited as HUF property. Looking at the cluster of words, the author also remembers that he is the son-in-law of a CA who in turn is a son-in-law of another CA—can the prefix Grand be used here also?