1978 (4) TMI 60 - HC - Income Tax

Summary

Issues:
Interpretation of Hindu Undivided Family (HUF) concept for tax assessment purposes.
Assessment of dividend income and capital gains in the hands of an individual or the HUF.
Consideration of whether the act of a female member can be deemed as throwing property into the common hotchpot of the HUF.
Determining the scope of the question referred by the Tribunal and its relation to the issue of gifts to the HUF.

Analysis:
The judgment pertains to a reference under the Income Tax Act, 1961, involving the assessment years 1966-67 to 1969-70. The case revolves around the assessee, who is the wife of Chandra Kumar Agarwalla and mother of minor daughters and a son. The Income Tax Officer (ITO) discovered undisclosed dividend income and capital gains from share sales by the assessee. The assessee claimed that the shares were transferred to her minor daughters as part of the HUF and thus not assessable in her hands but in the HUF's hands.

The ITO rejected the contention, stating that a single male member with female members does not constitute an HUF, and the assessee, not being a coparcener, could not throw the shares into the HUF. The appellate authorities upheld the decision, leading to a reference to the High Court. The main question raised was whether the act of the female assessee could be considered as throwing property into the HUF for tax assessment purposes.

The counsel for the assessee conceded that the issue was settled by a Supreme Court judgment but requested the case to be sent back to the Tribunal to consider if there was a gift to the HUF. The revenue's counsel argued that the question referred was limited in scope and did not cover the gift aspect. The Tribunal's rejection of a specific question on gifts was highlighted, indicating that the issue of gift to the HUF was not raised or addressed before the Tribunal.

The Court emphasized that when a specific legal question is rejected by the Tribunal, the petitioner must seek a direction from the High Court to include it in the statement of the case. As the Tribunal's question was narrow and did not encompass the gift issue, the Court dismissed the plea to refer the matter back for a gift assessment. The Court ruled in favor of the revenue, aligning with the Supreme Court precedent cited by the assessee's counsel.

In conclusion, the Court upheld the assessment of dividend income and capital gains in the hands of the individual assessee rather than the HUF. The judgment underscores the importance of precise legal questions raised before the Tribunal and the subsequent procedure for seeking High Court intervention on specific issues.