1941 (7) TMI 21 - HC - Income Tax

Summary

Issues Involved:

1. Whether the income from the impartible estate is chargeable as the income of an individual or as a Hindu undivided family.
2. Whether the maintenance paid to the younger brother is an admissible deduction.
3. Whether the income from house property should be assessed under Section 9 or Section 12 of the Indian Income-tax Act.
4. Whether the interest income from the impartible estate is income of the family or the individual.
5. Whether the previous High Court decisions and customs regarding impartible estates are applicable.

Detailed Analysis:

1. Chargeability of Income from Impartible Estate:

The primary issue was whether the income from the impartible estate should be taxed as the income of an individual or as that of a Hindu undivided family (HUF). The High Court of Lahore had previously ruled that such income should be taxed as the income of a HUF. However, the Commissioner of Income-tax contended that the income should be taxed as the individual income of the assessee, who is the head of the family.

The judgment concluded that the income from the impartible estate is not the income of the undivided family but is the income of the present holder, notwithstanding that he has sons from whom he is not divided. The income is received by the holder of the estate as his own income and not on behalf of the family.

2. Maintenance Paid to Younger Brother:

The maintenance paid to the younger brother was assumed to be an admissible deduction, as held in the previous case of 1930. The younger brother's allowance was not considered part of the family's income but was chargeable against the recipient as his income.

3. Assessment of Income from House Property:

The High Court rejected the claim of the Commissioner to tax the assessee as an individual upon the income of the house property under Section 9 of the Act. The court held that "the owner" of the buildings and lands appurtenant thereto is not the assessee but the Hindu undivided family. The judgment agreed with this reasoning, stating that the property owned by an individual Hindu and property owned by a Hindu undivided family must be distinguished by applying Hindu law.

However, the judgment noted that the contention that the income from house property might be charged under Section 12 was not raised in the case as stated, nor was it dealt with in the High Court. Therefore, no opinion was expressed on this new line of attack.

4. Interest Income from Impartible Estate:

The High Court held that the income of an impartible estate is the income of the family and not of the present holder. However, the judgment disagreed, stating that the income of an impartible estate is not income of the undivided family but is the income of the present holder.

The judgment referenced previous cases, such as Jagadamba Kumari v. Narain Singh, which held that the income from an impartible estate is the absolute property of the owner of the estate. The judgment emphasized that the holder of an impartible estate can invest the balance of the income for himself, and the right to maintenance for junior members is a right of a different character from that of a cosharer to enjoy his share.

5. Applicability of Previous High Court Decisions and Customs:

The judgment noted that the law as declared in the cases of Baijnath and Shiba Prasad Singh has not been unsettled by the Gorakhpur case. The observation in the Gorakhpur case was controlled by the reference to Baijnath's case, which negated the view that an impartible estate could not be in any sense joint family property.

The judgment clarified that the right to maintenance out of an impartible family estate does not make junior members actual co-owners of the income. The income from the estate is received by the holder as his own income and not on behalf of the family.

Conclusion:

The judgment concluded that the income from house property should not be taxed under Section 9 as the individual income of the assessee, but the interest income from the impartible estate should be taxed as the individual income of the present holder. The appeal was allowed, and the High Court's order was varied accordingly. The appellant was ordered to pay the respondent's costs of the appeal.