1978 (12) TMI 28 - HC - Income Tax

Summary

Issues Involved:

1. Inclusion of income from property at Nohar, Rajasthan.
2. Inclusion of income from Thirani building, Darjeeling.
3. Inclusion of income from the firm, M/s. Maheswari & Co., in the assessment of the assessee in the status of the HUF.

Issue-wise Detailed Analysis:

1. Inclusion of income from property at Nohar, Rajasthan:

The Tribunal had to determine whether the share of income from the property at Nohar, Rajasthan, could be included in the assessment of the assessee in the status of the HUF. Prior to the partition, the properties were Mitakshara coparcenary properties of the assessee, his two brothers, and his father, Iswardas. Upon partition, Iswardas got the house properties and was assessed as an individual. Upon his death, the widow and daughters relinquished their interests in favor of the sons. The ITO held that these properties were ancestral and became the properties of the HUF of the assessee and his sons, thus includible in the assessment. However, the court found that after the partition, Iswardas was not a coparcener with anyone, and the properties ceased to be coparcenary properties. Consequently, the properties were inherited by the widow, sons, and daughters under Section 8 of the Hindu Succession Act, 1956, and thus, the income was not includible in the HUF assessment.

2. Inclusion of income from Thirani building, Darjeeling:

Similar to the Nohar property, the inclusion of income from Thirani building, Darjeeling, was questioned. The court reiterated that after the partition, the properties ceased to be coparcenary properties and were inherited by the widow, sons, and daughters under Section 8 of the Hindu Succession Act, 1956. The court emphasized that the properties were not ancestral in the hands of the sons and thus, the income from these properties was not includible in the HUF assessment.

3. Inclusion of income from the firm, M/s. Maheswari & Co.:

The Tribunal also had to decide whether the share of income from the firm, M/s. Maheswari & Co., could be included in the assessment of the assessee in the status of the HUF. The ITO held that the share of the firm became ancestral property in the hands of the sons, thus includible in the HUF assessment. However, the court found that the share in the firm was inherited by the widow, sons, and daughters under Section 8 of the Hindu Succession Act, 1956, and not by survivorship. Therefore, the income from the firm was not includible in the HUF assessment.

Conclusion:

The court concluded that the properties and the share in the firm were inherited by the widow, sons, and daughters under Section 8 of the Hindu Succession Act, 1956, and not by survivorship. Consequently, these properties were not ancestral in the hands of the sons, and their respective sons had no interest in these properties during the lifetime of their fathers. Therefore, the income from these properties was not includible in the assessment of the assessee in the status of a HUF. The question was answered in the negative and in favor of the assessee.