1984 (4) TMI 25 - HC - Income Tax

Summary

Issues Involved:
1. Status of the assessee for tax assessment (Hindu Undivided Family (HUF) vs. individual).
2. Character of properties acquired by the assessee's grandfather.
3. Applicability of the Supreme Court decisions in Surjit Lal Chhabda v. CIT, Gowli Buddanna v. CIT, and Narendranath v. CWT.
4. Impact of Section 64(2) of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Status of the Assessee for Tax Assessment:
The central issue was whether the assessee should be assessed in the status of a Hindu Undivided Family (HUF) or as an individual. The Income Tax Officer (ITO) initially assessed the income from the properties in the status of an individual, arguing that the properties were the self-acquired properties of the assessees. The Appellate Assistant Commissioner (AAC) and the Income-tax Appellate Tribunal (ITAT) disagreed, holding that the properties were ancestral and should be assessed in the status of a HUF. The High Court, however, concluded that the properties were not ancestral or joint family properties, but rather self-acquired properties, and thus should be assessed in the individual capacity of the assessees.

2. Character of Properties Acquired by the Assessee's Grandfather:
The properties in question were purchased by the assessees' grandfather in the names of the assessees and their brother. The ITO argued that there was no indication in the purchase documents that the grandfather intended the properties to be ancestral. The Tribunal held that the properties were to be enjoyed hereditarily, implying joint family properties. However, the High Court noted that the properties were divided among the three brothers without involving their father, indicating that the properties were considered self-acquired. The High Court emphasized that for properties to be considered ancestral, they must be inherited, not merely purchased by the grandfather.

3. Applicability of Supreme Court Decisions:
The AAC and the Tribunal applied the Supreme Court decisions in Gowli Buddanna v. CIT and Narendranath v. CWT, which dealt with properties originally belonging to a joint family and later coming into the hands of a sole surviving coparcener. The High Court, however, found these decisions inapplicable, as the properties in question were self-acquired and not ancestral. Instead, the High Court found the decision in Surjit Lal Chhabda v. CIT more relevant, where the Supreme Court held that income from properties thrown into the family hotch-pot by a sole surviving coparcener should be assessed in his individual capacity.

4. Impact of Section 64(2) of the Income Tax Act:
The High Court also considered the applicability of Section 64(2) of the Income Tax Act, which deals with the conversion of individual property into joint family property after December 31, 1969. The Tribunal had not considered this aspect. The High Court noted that even if the properties were thrown into the common stock, the income derived from such properties should be assessed in the individual capacity of the assessee due to the provisions of Section 64(2).

Conclusion:
The High Court concluded that the properties were self-acquired and not ancestral or joint family properties. Consequently, the income from these properties should be assessed in the individual capacity of the assessees. The Court also noted that the provisions of Section 64(2) would apply, further supporting the assessment in the individual capacity. The question referred to the Court was answered in the negative and in favor of the Revenue, with no costs.