2004 (5) TMI 45 - HC - Income Tax

Tribunal is not right in holding that if the property is self-acquired property in the hands of a Hindu male it will remain self-acquired property even after his death. This is not correct - On the death it becomes ancestral property in the hands of his sons. All property inherited by a male Hindu from his father, father s father or father s father s father, is ancestral property , (vide Mulla s Principles of Hindu Law). - these appeals are allowed and the impugned judgment of the Tribunal is set aside and the orders of the Commissioner of Income-tax (Appeals) holding that in the absence of a will the self-acquired property of a father dying intestate and the income thereon was in the status of a Hindu undivided family, is restored

Summary

Issues:
Appeal challenging the judgment of the Income-tax Appellate Tribunal regarding the status of late Giridhari Lal and the taxation of interest on enhanced compensation.

Analysis:
The case involved six connected income-tax appeals challenging the Tribunal's decision. The appellant contested the status of late Giridhari Lal and the taxation of interest received on enhanced compensation. The facts revealed that the acquired land of Gayasen was taken over by the U. P. Awas Evam Vikas Parishad after his death, and enhanced compensation was awarded to Giridhari Lal. The Commissioner of Income-tax (Appeals) initially ruled in favor of assessing Giridhari Lal as a Hindu undivided family, but the Tribunal later reversed this decision, considering Giridhari Lal as an individual for tax assessment purposes.

The High Court analyzed the nature of property under Hindu law upon the death of a male. It was established that even self-acquired property becomes ancestral property in the hands of sons upon the father's death. The court referred to the Hindu Succession Act and previous legal precedents to support this interpretation. The Tribunal's view that the property remained self-acquired in Giridhari Lal's hands was deemed incorrect. The court cited the Supreme Court's decision in a relevant case to emphasize that ancestral property status applies in such situations.

The Tribunal's error was identified as considering self-acquired property to retain its status even after the death of the Hindu male owner. The court clarified that under Hindu law, property inherited from ancestors automatically becomes ancestral property. Quoting Mulla's Principles of Hindu Law, the court reinforced the principle that property inherited from forefathers is deemed ancestral. Consequently, the High Court allowed the appeals, overturning the Tribunal's judgment and ruling in favor of assessing the late Giridhari Lal as a Hindu undivided family for tax purposes.