2018 (12) TMI 1077 - AT - Income Tax

Assessment of income of HUF - CIT-A confirming the order of the AO by treating the interest income of the (HUF) Satish Tyagi to that of the individual Satish Tyagi - Held that - We find that the issue in dispute is squarely covered by the decision of Sh. Ashwani Kumar Tyagi vs. ITO, Noida 2017 (10) TMI 933 - ITAT DELHI factual reason to disallow the claim of the HUF is that no such return was filed and no such tax had been paid by the HUF. The issue gets settled by the payment of taxes by the HUF through the declaration made before the Pr. CIT under IDS, which has been accepted, as all taxes have been paid. Therefore, in such circumstances, and facts of the case, since the HUF has already paid tax due alongwith interest, etc and correct share had been declared at ₹ 27,79,279/- as against lesser amount of ₹ 22,50,413/- taken by both the authorities below, the Assessing Officer is directed to delete the addition so made. Thus, the grounds of appeal raised by the assessee are allowed.

Issues Involved:
1. Treatment of interest income of Satish Tyagi (HUF) as individual income.
2. Existence of a new HUF after the death of Ved Prakash in 1954.
3. Assessment of benefits from acquisition of ancestral land.
4. Non-filing of Income Tax Return by Ved Prakash (HUF).
5. Members' interest in HUF and ancestral property.
6. Ancestral coparcenary property passed to the joint family.
7. Interest income credited using PAN of Satish Kumar (Individual).
8. Continuation of Joint Hindu Family after the death of the sole member.
9. Bhumidhar rights under the UP Zamindari Abolition and Land Reforms Act.
10. Treatment of Joint Family as a separate unit under section 37 of the UP Zamindari Abolition and Land Reforms Act.
11. Partition order by the Assessing Officer under section 171 of the Act.

Detailed Analysis:

1. Treatment of Interest Income of Satish Tyagi (HUF) as Individual Income:
The primary issue was whether the interest income received on delayed compensation for acquired ancestral agricultural land should be taxed in the hands of Satish Tyagi as an individual or as part of his HUF. The Tribunal found that the interest income belonged to the HUF, not the individual, as the income was derived from ancestral property.

2. Existence of a New HUF after the Death of Ved Prakash in 1954:
The assessee argued that a new HUF came into existence after Ved Prakash's death. The Tribunal accepted the existence of the HUF, noting that the interest on delayed compensation was released to the HUF.

3. Assessment of Benefits from Acquisition of Ancestral Land:
The Tribunal held that the benefits derived from the acquisition of ancestral land should be assessed in the hands of the HUF, not the individual. This was in line with the ITAT's earlier decisions in similar cases involving the same family.

4. Non-filing of Income Tax Return by Ved Prakash (HUF):
The CIT(A) had dismissed the claim of the HUF on the grounds that no income tax return was filed by Ved Prakash (HUF). The Tribunal found this reasoning flawed, as agricultural income was not liable to tax under section 10(37) of the IT Act, 1961.

5. Members' Interest in HUF and Ancestral Property:
The Tribunal acknowledged that each member born in a Joint Hindu Family acquires an interest in the HUF property. The property inherited by a Hindu from his ancestors is considered ancestral property.

6. Ancestral Coparcenary Property Passed to the Joint Family:
The Tribunal recognized that the agricultural land was ancestral coparcenary property passed down through generations, thus belonging to the HUF.

7. Interest Income Credited Using PAN of Satish Kumar (Individual):
The interest income was credited using the PAN of Satish Kumar (Individual) due to the absence of a PAN for the HUF. The Tribunal accepted that the interest income belonged to the HUF and not to the individual.

8. Continuation of Joint Hindu Family after the Death of the Sole Member:
The Tribunal referenced the principle that a Joint Hindu Family continues to exist as long as the property remains undivided among the family members, even after the death of the sole member.

9. Bhumidhar Rights under the UP Zamindari Abolition and Land Reforms Act:
The Tribunal considered the Bhumidhar rights created under section 18 of the UP Zamindari Abolition and Land Reforms Act, which were new rights of the deceased’s son in the agricultural land.

10. Treatment of Joint Family as a Separate Unit under Section 37 of the UP Zamindari Abolition and Land Reforms Act:
The Tribunal noted that section 37 of the UP Zamindari Abolition and Land Reforms Act provides for treating the Joint Family as a separate unit.

11. Partition Order by the Assessing Officer under Section 171 of the Act:
The Tribunal observed that an order of partition of a Joint Hindu Family can be passed by an Assessing Officer only when the HUF is assessed to income tax. Since the family had only agricultural income and was not liable to tax, no such order could be passed under section 171 of the Act.

Conclusion:
The Tribunal allowed the appeal, holding that the interest income from the delayed compensation for the acquired ancestral agricultural land should be assessed in the hands of the HUF and not the individual. The decision was based on earlier ITAT rulings in similar cases and the principles of Hindu Law regarding ancestral property.

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