1978 (5) TMI 17 - HC - Income Tax

Summary

Issues Involved:

1. Inclusion of income from the firm in the taxable income of the individual.
2. Validity of bequest of property by the testatrix to the joint Hindu family.
3. Characterization of the bequest as joint family property.
4. Characterization of the bequest as individual property.

Issue-wise Detailed Analysis:

Issue 1: Inclusion of Income from the Firm in the Taxable Income of the Individual

The Tribunal held that the income of the assessee from the firm, M/s. Rameshwar Dass Hari Shankar, Ahmedabad, was not includible in the taxable income of Ghansham Dass, individual. The Tribunal's findings were based on the fact that the income from the said firm was transferred to the HUF of M/s. Ghansham Dass Gaja Nand of Bhiwani. The Tribunal inferred that the share income earned by Ghansham Dass as a partner in the firm for the period subsequent to the death of Smt. Manbhawati Devi was assessable as the income of the HUF. The court affirmed this view, stating that Ghansham Dass could form a HUF with his wife and unmarried daughter, and thus, the income was rightly excluded from his individual taxable income.

Issue 2: Validity of Bequest of Property by the Testatrix to the Joint Hindu Family

The Tribunal held that Smt. Manbhawati Devi's will, which bequeathed property to the HUF of Ghansham Dass, his wife, and his daughter, did not make the property joint family property. The court disagreed, stating that the property bequeathed by Smt. Manbhawati Devi would become joint family property. It was noted that there was no legal bar preventing Smt. Manbhawati Devi from bequeathing property to the HUF. The court concluded that the Tribunal erred in observing that the property could not become HUF property because Smt. Manbhawati Devi was not a coparcener.

Issue 3: Characterization of the Bequest as Joint Family Property

The court held that the property bequeathed by Smt. Manbhawati Devi acquired the character of joint family property of the HUF constituted by Ghansham Dass, his wife, and unmarried daughter. This was contrary to the Tribunal's view that the property became the joint property of the three individuals. The court clarified that the property bequeathed by Smt. Manbhawati Devi should be treated as joint family property, thereby answering question No. (ii) in the negative.

Issue 4: Characterization of the Bequest as Individual Property

Given the court's finding on Issue 3, it followed that the bequest made by the testatrix did not become the individual property of Ghansham Dass. The court answered question No. (iv) in the negative, affirming that the property was joint family property and not individual property.

Conclusion:

The court concluded that the income from the firm was not includible in the individual taxable income of Ghansham Dass. It further held that the property bequeathed by Smt. Manbhawati Devi became joint family property and not the individual property of Ghansham Dass. The court affirmed the Tribunal's decision on the exclusion of income but disagreed on the characterization of the bequest, ultimately ruling in favor of the revenue on the nature of the property. The assessee was entitled to costs assessed at Rs. 250.