1974 (10) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Whether the properties in question were the individual or separate properties of the assessee.
2. Whether the income derived by the assessee from the said properties was his personal income and not that of his 'HUF'.
3. Whether the assessee's status should be taken as that of an 'individual'.

Issue-wise Detailed Analysis:

1. Individual or Separate Properties of the Assessee:
The Tribunal initially held that the properties in question were the absolute properties of the assessee. The assessee contended that after the abolition of the rule of primogeniture, the properties ceased to be impartible and should be considered as part of the Hindu Undivided Family (HUF). The Tribunal, however, maintained that the properties continued to be the absolute properties of the assessee. The High Court noted that the Tribunal did not adequately address whether the estate had indeed lost its impartibility. The Court pointed out that the character of an impartible estate, even when it ceases to be impartible, does not automatically revert to joint family property unless it is established that the estate has lost its impartibility.

2. Income Derived from the Properties:
The Tribunal concluded that the income from the properties was the individual income of the assessee. The Court referred to precedents, including the Privy Council's decision in Shiba Prasad Singh v. Rani Prayag Kumari Devi and the Supreme Court's decision in Sri Rajah Velugoti Kumar Krishna Yachendra Vartu v. Shri Rajah Velugoti Sarvagna Kumara Krishna Yachendra Varu, which established that the income of an impartible estate is the individual income of the holder. The Court emphasized that the Tribunal should have examined whether the estate had lost its impartibility, as this would impact the determination of whether the income was individual or joint family income.

3. Assessee's Status as an Individual:
The Tribunal held that the assessee's status should be taken as that of an individual. The Court noted that the real question was whether the estate had lost its impartibility and, if so, from which year. The Court highlighted that the Hindu Succession Act, 1956, brought about changes in the rules of Hindu law relating to impartible estates, except those expressly saved by Section 5(ii) of the Act. The Court directed the Tribunal to examine the custom of the impartible estate, the rule of primogeniture, the terms of the covenant with the Government of India, and whether the properties were part of the Gaddi to determine the status of the assessee.

Conclusion:
The High Court declined to answer the questions referred by the Tribunal, stating that the Tribunal had failed to consider whether the estate had lost its impartibility. The matter was sent back to the Tribunal with directions to examine the relevant facts and determine if the estate had lost its impartibility and from which year. The Tribunal was instructed to dispose of the appeal in light of the principles governing the nature of impartible estates and joint family property. There was no order as to costs in the reference.