1998 (3) TMI 80 - HC - Income Tax

Summary

Issues Involved:
1. Assessment of property income in the hands of the individual assessee.
2. Validity and genuineness of the conversion of individual property into Hindu Undivided Family (HUF) property and subsequent partial partition.
3. Applicability of Section 64(2)(b) of the Income-tax Act, 1961, in assessing the income from converted properties.
4. Inclusion of income from certain properties in the individual or HUF assessments.
5. Inclusion of net wealth of properties in individual or HUF assessments.

Detailed Analysis:

1. Assessment of Property Income in the Hands of the Individual Assessee:
The primary issue in T.C. No. 31 of 1982 was whether the property income of Rs. 42,814 assessed by the Income-tax Officer in the hands of the individual assessee could be sustained. The Tribunal held that the income could not be included in the individual assessment of the assessee, as the properties had been converted into HUF properties and subsequently partitioned. The Tribunal's decision was upheld, affirming that the income from the properties should not be included in the individual assessment.

2. Validity and Genuineness of the Conversion and Partial Partition:
The Tribunal examined the deed of declaration and the subsequent partial partition. It was held that the conversion of individual properties into HUF properties and the subsequent partial partition were genuine and valid. The Tribunal found that the assessee had abandoned all individual rights over the properties, impressing them with the character of joint family properties. The Tribunal also upheld the partial partition, rejecting the Income-tax Officer's view that the arrangement was not genuine. The Tribunal's decision was affirmed, confirming the genuineness and validity of the conversion and partial partition.

3. Applicability of Section 64(2)(b) of the Income-tax Act:
The Tribunal considered whether the assessee was liable to be assessed in respect of the income attributable to his interest in the converted property under Section 64(2)(b) of the Income-tax Act. The Tribunal directed the Income-tax Officer to include the income arising from the spouse of the assessee under Section 64(2)(c) but did not fully address Section 64(2)(b). The Tribunal's decision was upheld, with the clarification that only the income of the wife was liable to be included in the hands of the assessee in his individual capacity.

4. Inclusion of Income from Certain Properties in Individual or HUF Assessments:
Several tax cases (T.C. Nos. 394 to 398, 399, 1075 to 1078, 1098 to 1100, 1247 and 1248, 1561 to 1565, 1837 to 1840, 1991, 2064 and 2065) involved the inclusion of income from portions of properties at Door No. 301, T.H. Road, Madras, in the individual or HUF assessments. The Tribunal held that the income from portions of the property allotted to the assessee's sister and mother could not be considered as the income of the assessee. The Tribunal's decision was upheld, affirming that the income should not be included in the individual assessments.

5. Inclusion of Net Wealth of Properties in Individual or HUF Assessments:
In tax cases involving wealth-tax (T.C. Nos. 1247 and 1248, 1561 to 1565, 1837 to 1840), the issue was whether the net wealth of properties should be included in the individual assessment or the HUF assessment. The Tribunal held that the net wealth of the properties allotted to Kumari Chandra and the Bose Estate could not be included in the individual assessment of the assessee. The Tribunal's decision was upheld, confirming that the net wealth should be considered in the hands of Kumari Chandra and the Bose Estate.

Conclusion:
The Tribunal's decisions in all the tax cases were upheld, affirming that the income and net wealth from the properties should not be included in the individual assessments of the assessees. The Tribunal's findings on the genuineness and validity of the conversion of properties into HUF properties and the subsequent partial partition were also upheld. The questions of law were answered in the affirmative and against the Revenue, with the direction that the Income-tax Department pay costs to counsel for the Revenue.