1978 (4) TMI 45 - HC - Income Tax

Agricultural Income Tax Act, Clubbing Of Income, Family Property, Individual Property, Minor Child

Summary

Issues:
1. Validity of exclusion of certain lands from assessment
2. Interpretation of settlement in favor of wife and daughter
3. Application of Section 9(2) of the Act

Validity of exclusion of certain lands from assessment:
The petitioner was assessed under the Travancore-Cochin Agricultural Income-tax Act for an extent of wet and dry lands. For the assessment year 1972-73, the petitioner filed a composition application for a reduced extent of wet lands, excluding lands settled in favor of his wife and daughter. The Agrl. ITO issued a notice calling for consent to be assessed for the entire holding, which the petitioner refused, leading to the rejection of his application. The Commissioner dismissed the revision petition, stating that the settled lands should be included in the petitioner's holding as long as they were enjoyed by him. The petitioner challenged this decision on the grounds that his daughter was a major during the assessment year, and the settled lands should be excluded from his holding.

Interpretation of settlement in favor of wife and daughter:
The petitioner argued that the settled lands maintained their joint family character, as they were obtained in a partition with his father and brothers in 1938. He contended that settlements in favor of his wife and daughter should not be considered transfers of his absolute property, invoking decisions highlighting the joint family nature of the property. The petitioner relied on Supreme Court judgments emphasizing that property received in partition retains its joint family character, even in the hands of a single coparcener.

Application of Section 9(2) of the Act:
The Commissioner applied Section 9(2) to include the income from settled lands in the petitioner's assessment, despite acknowledging the validity of the settlements. However, the court held that since the settled property was of joint family character, Section 9(2) could not be invoked. Citing a Full Bench decision of the Allahabad High Court, the court emphasized that Section 9(2) applies only when the assessee transfers his absolute assets to his wife and minor child, which was not the case here. Consequently, the court set aside the Commissioner's order and directed a reevaluation of the petitioner's composition application.

In conclusion, the court allowed the writ petition, setting aside the Commissioner's order and directing a reevaluation of the petitioner's composition application in accordance with the law.