1980 (9) TMI 54 - HC - Income Tax

Summary

Issues Involved:

1. Applicability of Hindu Succession Act, 1956, to the impartible estate.
2. Ownership of property under Hindu joint family.
3. Validity of partition deed dated April 10, 1962.
4. Inclusion of income from partitioned properties in the assessee's total income.

Issue-wise Detailed Analysis:

1. Applicability of Hindu Succession Act, 1956, to the impartible estate:

The Tribunal held that the Hindu Succession Act, 1956, radically changed the law regarding impartible estates, abolishing them except those saved by sections 5(ii) and 5(iii) of the Act. Under section 4 of the Hindu Succession Act, the rule of primogeniture ceased to have effect, and all impartible estates, except those saved, would now have the ordinary incidents of property. The Tribunal concluded that section 27(ii) of the I.T. Act, 1961, could not be applied to the estate in question as it was no longer an impartible estate.

2. Ownership of property under Hindu joint family:

The Tribunal found that the property belonged to the Hindu joint family and that there had been a valid partition by a deed dated April 10, 1962. It was held that the shares of the parties had been divided into definite shares, making the coparceners the owners of the properties allotted to them. The Tribunal upheld the AAC's order directing the ITO to exclude the income from those properties allotted to the shares of the other coparceners from the total income of the assessee.

3. Validity of partition deed dated April 10, 1962:

The Tribunal held that the partition of the properties comprising the impartible estate by the deed dated April 10, 1962, was valid. The Tribunal found nothing to doubt the partition and upheld the order of the AAC, which directed the ITO to exclude the income from those properties allotted to the shares of the other coparceners from the total income of the assessee.

4. Inclusion of income from partitioned properties in the assessee's total income:

The Tribunal upheld the AAC's order, which directed the ITO to exclude the income from the properties allotted to the shares of the other coparceners from the total income of the assessee. The Tribunal found that the income from the partitioned properties should not be included in the assessee's total income.

High Court's Judgment:

The High Court disagreed with the Tribunal's conclusions. It held that the Hindu Succession Act, 1956, did not affect the position and character of the HUF or the ingredients of the impartible estate as such, which existed before the Act's commencement. The Court found that section 27(ii) of the I.T. Act, 1961, was applicable to the impartible estate, and the income from such properties should be included in the total income of the assessee. The Court answered all three questions in the negative and in favor of the revenue.

Additional Submissions:

After delivering the judgment, the assessee's counsel contended that certain properties did not form part of the impartible estate and should not be included in the assessee's income. The Court noted that this issue was not considered by the Tribunal and allowed the assessee to raise this contention before the Tribunal when disposing of the matter under section 260(1) of the I.T. Act, 1961. The Tribunal was directed to dispose of the appeal in accordance with law, considering the principles mentioned by the Supreme Court in Esthuri Aswathiah v. CIT.