1980 (10) TMI 3 - HC - Income Tax

Summary

Issues Involved:
1. Assessability of income from property and dividends in the hands of the assessee as an individual or as a Hindu Undivided Family (HUF).

Issue-wise Detailed Analysis:

1. Assessability of Income from Property and Dividends:
- Background and Facts:
- The controversy pertains to the income from property at 18-A, Aurangzeb Road, New Delhi, and dividends from shares enjoyed by the assessee.
- The Income Tax Officer (ITO) assessed these incomes in the hands of the assessee as an individual.
- The assessee claimed that the income belonged to his HUF and not to him individually.
- The Tribunal accepted the assessee's claim, but the Revenue sought a reference under section 256(2) of the Income Tax Act, 1961.

- Gift Deed and Property Transfer:
- A deed of gift was executed on January 11, 1956, by the assessee's father, transferring property at 18-A, Aurangzeb Road, New Delhi, to the assessee.
- Earlier, in December 1954, the father had gifted Rs. 50,000 in cash to the assessee, which was used to purchase shares.
- At the time of these gifts, the assessee was unmarried.

- Assessment History:
- From the time of the gifts until the birth of his son in 1961, the income from the property and dividends was declared and assessed in the assessee's individual hands.
- Upon the birth of his son, the assessee claimed that the income should be taxed in the hands of his HUF.

- Tribunal's Decision:
- The Tribunal directed that the property and dividend incomes should be excluded from the assessee's individual hands and assessed in the status of a HUF.

- Revenue's Argument:
- The Revenue contended that the property and shares were gifted to the assessee absolutely and should be assessed in his individual capacity.

- Court's Analysis:
- The court examined the intention behind the gift deed and the surrounding circumstances.
- The gift deed did not mention that the property was being transferred for the benefit of the family.
- The assessee's conduct of declaring the income as individual income for several years indicated that he treated the property as his individual property.
- The Tribunal's assumption that the property was ancestral in the hands of the father was not supported by evidence.
- The property was treated as the father's self-acquired property, and the gift was made to the assessee absolutely.

Judgment:
- Majority Opinion:
- The court concluded that the property and shares were gifted to the assessee absolutely and should be assessed in his individual capacity.
- The question was answered in the affirmative and in favor of the Revenue.

- Dissenting Opinion:
- The dissenting judge disagreed with the majority's conclusion, arguing that the properties were joint family properties in the hands of the father.
- The dissenting opinion emphasized that the entire case proceeded on the basis that the properties were joint family properties.
- The dissenting judge would have answered the question in the negative and in favor of the assessee.

Final Judgment:
- Upon a difference of opinion between the judges, the matter was placed before a third judge.
- The third judge concurred with the dissenting opinion, concluding that the property remained impressed with the characteristics of HUF property.
- The final answer to the question was in the negative and in favor of the assessee, with each party bearing their own costs.