1995 (8) TMI 31 - HC - Income Tax

Summary

Issues:
1. Formation of joint Hindu family by female heirs under Dayabhaga school of Hindu law.
2. Impression of inherited property as joint family property by female heirs under Dayabhaga school of Hindu law.
3. Assessment of inherited property in the hands of the assessee in the status of an individual.

Analysis:
The case involved questions referred by the Income-tax Appellate Tribunal regarding the formation of a joint Hindu family by female heirs under the Dayabhaga school of Hindu law, the ability to impress inherited property as joint family property, and the assessment of inherited property in the hands of the assessee as an individual. The deceased Hindu, governed by the Dayabhaga school of Hindu law, left properties to his widow and two daughters. The widow and daughters inherited the properties equally. The assessee claimed that by executing an agreement, they formed a Hindu undivided family (HUF) and held the properties as such. However, the Income-tax Officer assessed the income in the hands of the assessee as an individual, rejecting the HUF claim.

The Appellate Assistant Commissioner and the Tribunal had conflicting decisions, with the Tribunal eventually allowing the appeal, stating that the properties were held by the HUF. The Income-tax Department sought a reference to the High Court, which directed the Tribunal to refer the questions for opinion. The Revenue argued against the formation of an HUF by agreement, citing various legal interpretations and court decisions.

The High Court analyzed the legal provisions and previous judgments, emphasizing that under the Hindu Succession Act, heirs inherit properties as tenants-in-common, not joint tenants. However, the court held that there is no bar in forming an HUF by agreement under the Dayabhaga school of Hindu law. Referring to the Calcutta High Court decision, the court concluded that heirs, whether male or female, can form a joint Hindu family by agreement and become joint owners of inherited properties. Consequently, the court answered questions regarding the formation of an HUF and the impression of property as joint family property in favor of the assessee, while ruling against the Revenue on the assessment issue.

The judgment provided a detailed analysis of the legal principles under the Dayabhaga school of Hindu law, the implications of forming an HUF by agreement, and the assessment of inherited properties for taxation purposes. It clarified the rights of female heirs in inheriting and managing properties under the Dayabhaga school of Hindu law, setting a precedent for similar cases involving the formation of joint Hindu families by heirs.