1984 (10) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Determination of the status of the assessee as a Hindu Undivided Family (HUF) or an individual.
2. Effect of the Hindu Succession Act, 1956, on the impartible estate governed by lineal primogeniture.
3. Applicability of Section 27(ii) of the Income-tax Act regarding house property.
4. Classification of income from salary as a Member of Legislative Council (M.L.C.).

Issue-wise Detailed Analysis:

1. Determination of the Status of the Assessee:
The primary issue was whether the Tribunal was correct in determining the status of the assessee as a Hindu Undivided Family (HUF). The assessee succeeded to the Gaddi of the late Maharaja in 1950 and was initially assessed as an individual. However, post the enactment of the Hindu Succession Act in 1956, the assessee claimed HUF status for the assessment years 1967-68 to 1969-70. The Tribunal, agreeing with the Appellate Assistant Commissioner, held that the status of the assessee should be that of an HUF.

2. Effect of the Hindu Succession Act, 1956:
The Hindu Succession Act, 1956, particularly Section 4(1), was pivotal in this case. It states that any custom or usage inconsistent with the Act shall cease to have effect. The court noted that the custom of impartibility and lineal primogeniture ceased to have effect post-1956. The Privy Council in Shiba Prasad Singh v. Rani Prayag Kumari Debi had earlier established that impartibility is a custom, and the right of survivorship remains despite the custom. The enactment of Section 4(1) of the Hindu Succession Act nullified the custom, allowing the property to be treated as joint family property. The court concluded that the assessee, who was an individual from 1950 to 1956, was entitled to HUF status post-1956.

3. Applicability of Section 27(ii) of the Income-tax Act:
The Revenue argued that under Section 27(ii) of the Income-tax Act, the house property must be treated as the individual property of the assessee. However, the court rejected this argument, stating that Section 27(ii) applies to properties of impartible estates. Since the impartible estate ceased to exist post-1956 due to the Hindu Succession Act, the properties could not be treated as individual properties of the assessee. The court clarified that Section 27(ii) remains relevant for estates impartible by grant or covenant, which continued to exist post-1956.

4. Classification of Income from Salary as M.L.C.:
The court addressed the income from the assessee's salary as a Member of Legislative Council (M.L.C.), which was shown in Part IV of the return. This income was classified as the result of an individual act or acquisition of the assessee and not as part of the HUF income. The court noted that if the assessee had any other income as an individual above the assessable threshold, the authorities might consider assessing him as such.

Conclusion:
The court concluded that the Tribunal was correct in determining the status of the assessee as a Hindu Undivided Family (HUF). The reference was answered in the affirmative, in favor of the assessee and against the Department. There was no order as to costs.