1991 (6) TMI 28 - HC - Income Tax

Summary

Issues:
1. Assessment of share income in the hands of an individual versus a Hindu undivided family.

Analysis:
The High Court was tasked with determining whether the share income of an individual, Talu Ram, from Ganesh Factory should be assessed in his capacity as an individual or as a member of a Hindu undivided family (HUF). The case involved a partial partition of business assets on October 1, 1966, where Talu Ram was allotted a one-fourth share. The dispute arose as to whether this share belonged to him individually or to the smaller HUF representing Talu Ram, his wife, and minor daughter.

The court referred to the decision in CIT v. K. Satyanarayan Murty, where it was established that the property received on partial partition becomes personal property and loses the joint family character unless thrown into the family hotchpot. Applying this principle to the present case, the court concluded that the share allotted to Talu Ram in the partial partition of the business assets rightfully belonged to his HUF. The court emphasized that once Talu Ram effected a partial partition, the share could not be considered an asset of the smaller HUF.

The court considered precedents cited by the assessee, including Prem Chand v. CIT and Gopal Ramanarayan v. CIT, where conflicting views were presented by different High Courts. However, the court aligned with the reasoning of the Orissa High Court judgment, emphasizing the importance of the specific circumstances of the case at hand.

Additionally, the court discussed the decision in CIT v. Polaki Butchi Babu, another judgment of the Orissa High Court, noting that the facts were distinguishable, and the earlier decision was not considered. Ultimately, the court ruled in favor of the Revenue, holding that the share income of Talu Ram from Ganesh Factory should be assessed in his individual capacity rather than in the hands of his HUF.

In conclusion, the court answered the referred question in the negative, supporting the Revenue's position and emphasizing that the share income should be assessed in the hands of Talu Ram as an individual, not as a member of the HUF. No costs were awarded in this judgment.