1989 (5) TMI 9 - HC - Income Tax

Summary

Issues:
Assessment of income from Schedule 'B' property in the hands of Hindu undivided family, applicability of section 9(3) of the Income-tax Act, 1961, and interpretation of Dayabhaga school of Hindu law.

Analysis:
The case involved a reference under section 256(2) of the Income-tax Act, 1961, regarding the assessment years 1958-59 and 1959-60. The main question was whether the income from one-fourth share in Schedule 'B' properties was assessable in the hands of the Hindu undivided family. The family, governed by the Dayabhaga school of Hindu law, originally consisted of four brothers. After a gift by one brother, the family structure changed, leading to a dispute over the assessment of income. The assessee argued that the remaining three-fourths share did not belong to the original family but to a new smaller Hindu undivided family. They contended that individual shares were definite and assessable separately under section 9(3) of the Indian Income-tax Act, 1922. The Tribunal, relying on precedent, held that the income from the remaining property share should be excluded from the total income of the family for both years under appeal.

The Revenue contended that as long as the Hindu undivided family remains undivided, separate assessment of coparceners in respect of property income is not permissible. The essence of coparcenary under Dayabhaga law was clarified as unity of possession, not unity of ownership. Each coparcener had a defined share in the property, becoming the owner of that share immediately upon inheritance. The court emphasized that until partition, no coparcener could claim a specific share, as unity of possession prevailed. The judgment referenced Mulla on Principles of Hindu Law and established that coparceners held defined shares jointly, subject to assessment under relevant tax laws.

The court upheld the Tribunal's decision, stating that income from jointly possessed house properties of a Hindu undivided family under the Dayabhaga school of Hindu law should be assessed separately in individual coparceners' hands based on their shares. Citing past decisions, including Biswa Ranjan Sarvadhikary and CWT v. Bishwanath Chatterjee, the court rejected the Revenue's argument and affirmed the applicability of section 9(3) of the 1922 Act and section 26 of the 1961 Act. Consequently, the question was answered in favor of the assessee, with no order as to costs. BHAGABATI PRASAD BANERJEE J. concurred with the judgment.