1982 (11) TMI 7 - HC - Income Tax

Summary

Issues Involved:

1. Status of the assessee for tax assessment (Individual vs. Hindu Undivided Family (HUF)).
2. Inclusion of minor sons' income in the assessee's income under Section 64(1)(ii) of the Income Tax Act.
3. Impact of partial partition of HUF property on the assessee's status.

Detailed Analysis:

1. Status of the Assessee for Tax Assessment (Individual vs. Hindu Undivided Family (HUF)):

The primary issue was whether the income from property received on partition by the assessee should be assessed as the income of an HUF consisting of the assessee and his wife. The assessee claimed that his status should be that of an HUF, while the Revenue argued that he should be assessed as an individual. The Tribunal had conflicting opinions, with the Accountant Member supporting the HUF status and the Judicial Member supporting the individual status. The third Member concurred with the Accountant Member, leading to the conclusion that the assessee's status should be that of an HUF.

2. Inclusion of Minor Sons' Income in the Assessee's Income under Section 64(1)(ii) of the Income Tax Act:

The Income Tax Officer (ITO) included the income of the assessee's two minor sons in the assessee's income under Section 64(1)(ii) of the Act. The assessee contended that this inclusion was incorrect as Section 64 applied only to individuals and not to an HUF. The Appellate Assistant Commissioner (AAC) upheld the ITO's decision, stating that the assessee had been assessed as an individual in previous years and there was no justification for changing his status to HUF. The Tribunal, however, ruled that the income of the minor sons should not be included in the assessee's income if his status was that of an HUF.

3. Impact of Partial Partition of HUF Property on the Assessee's Status:

The case involved a partial partition of an HUF property, specifically a cloth business. The AAC noted that the partition was partial and the HUF remained joint with regard to other properties. The Tribunal examined whether the property allotted to the assessee on partition retained its joint family character. The Supreme Court's decision in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC) was pivotal. It was established that a Hindu undivided family, not a coparcenary, is a taxable unit under the Income Tax Act, and a joint Hindu family can consist of a single male member and his wife. However, the property in question was the assessee's personal property post-partition and lacked the character of joint family property. The court concluded that even if the property was considered HUF property in a loose sense, it did not confer any right, title, or interest to the assessee's wife.

Conclusion:

The court referred to the principles established in Chhabda's case and other relevant judgments to conclude that the assessee's status should be that of an individual. The income from the property received on partition should be assessed in the status of an individual, not an HUF. Consequently, the inclusion of the minor sons' income in the assessee's income under Section 64(1)(ii) was upheld. The question referred to the court was answered accordingly, and there was no order for costs due to the absence of the assessee's appearance.