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2012 (9) TMI 403 - HC - Income TaxSuccession - Undisclosed income - interest income earned on FDRs - 50 % of the share of the deceased husband will go to his legal heirs and 50 % to the assessee - Held that - The CIT(A) as well as the ITAT have held that in terms of Section 5A which was brought into force in the year 1994 with retrospective effect from 01/04/1963, the assessee and her husband were governed by the system of Community of Assets ( COMMUNIAO DOS BENS ) which is in force in the State of Goa. The ITAT held that after the death of husband of the assessee, only 50 % of the share in the FDRs would pass on to three sons and one daughter and the assessee would be entitled to 50 % of the share and, therefore, the directions given by the CIT(A) to the AO to consider 50 % of the interest amount in the hands of the assessee as her undisclosed income for the block period, cannot be faulted. Thus the Tribunal has rightly placed reliance upon Section 5A of the Act and Articles 1122 and 1123 of Portuguese Family Civil Law which is in force in the State of Goa and dismissed the appeal preferred by the revenue against the order passed by the CIT(A) - submission made on behalf of the revenue that the assessment ought to have been on the basis of the body of individuals is totally misplaced - against revenue.
Issues:
- Appeal challenging ITAT order dismissing appeal against CIT(A) order - Assessment of undisclosed income from FDRs in the name of the assessee - Application of Section 5A of the Income Tax Act and Portuguese Family Civil Law - Division of interest income between legal heirs and the assessee - Justification of CIT(A) and ITAT orders Analysis: 1. The appeal before the Bombay High Court challenged the ITAT's decision dismissing the revenue's appeal against the CIT(A)'s order regarding the assessment of undisclosed income from Fix Deposit Receipts (FDRs) held in the name of the assessee. The ITAT upheld the CIT(A)'s findings, leading to the revenue's appeal. 2. The case involved the application of Section 5A of the Income Tax Act and Articles 1122 and 1123 of Portuguese Family Civil Law, relevant in the State of Goa, to determine the division of interest income from FDRs between the legal heirs of the deceased husband and the assessee. 3. The ITAT ruled that 50% of the deceased husband's share in the FDRs would pass to the legal heirs, while the assessee would retain the remaining 50%. This decision was based on the legal framework applicable to the assessee and her husband, as per Section 5A of the Act and Portuguese Family Civil Law, dismissing the revenue's appeal against the CIT(A)'s order. 4. The court rejected the revenue's argument that the entire interest income should be assessed in the hands of the assessee due to the FDRs being in her name, emphasizing the legal provisions governing the division of assets and income among legal heirs as per the applicable laws. 5. The court found that the revenue's reliance on previous judgments and sections of the Income Tax Act was misplaced, as the current case was governed by specific provisions like Section 5A and the Portuguese Family Civil Law, which dictated the division of income from the FDRs. 6. Ultimately, the court upheld the decisions of the CIT(A) and ITAT, concluding that the revenue's appeal lacked merit, and the substantial question of law raised was answered against the revenue, resulting in the dismissal of the appeal.
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