1986 (9) TMI 58 - HC - Income Tax

Summary

Issues Involved: Dispute over income tax assessments for assessment years 1962-63 to 1968-69, cancellation of assessments made on individual and joint family basis, legal status of joint family for tax purposes, applicability of section 171(1) of the Income-tax Act.

Summary:
The case involved a long-standing dispute regarding the ownership of a business carried on by a joint family member, which eventually led to income tax assessments for the years 1962-63 to 1968-69. Initially, assessments were made on an individual, Durgamma, but were later cancelled by the Tribunal, asserting that the business belonged to the joint family. Subsequently, assessments were initiated against the joint family, leading to further legal challenges.

The main contention revolved around whether assessments on a Hindu joint family for income derived from the business of motor buses were legally valid for the relevant assessment years. The Revenue argued that as no partition of joint family properties had occurred, the joint family should be deemed to exist for tax purposes under section 171(1) of the Income-tax Act. However, the court disagreed, emphasizing that the provision applied only to joint families previously assessed for tax and did not extend to all joint families.

The court highlighted that under general law, a joint family ceases to exist upon filing a suit for partition and obtaining a decree, as was the case here. Referring to a previous judgment, the court clarified that the fiction of a joint family continuing under section 171(1) was limited to assessed joint families. Consequently, the assessments on the joint family for the specified years were deemed improper and were upheld as such.

Additionally, the court expressed concern over the Revenue's handling of the case, noting missed opportunities to properly assess Durgamma as a receiver appointed by the court, potentially resulting in lost revenue for the government. Ultimately, the court ruled in favor of the assessee, concluding that the assessments on the joint family were not sustainable. No costs were awarded in the matter.