1975 (6) TMI 3 - HC - Income Tax

Summary

Issues: Assessment of income from shares and house property in the status of an individual, validity of throwing properties into HUF hotchpot, determination of HUF property income.

Analysis:
The judgment pertains to a reference under s. 256(1) of the Income Tax Act, 1961, where the main issue was whether the income from shares and house property was rightly assessed in the status of an individual. The assessee, a Hindu, had thrown properties into the hotchpot of his HUF, claiming that the income belonged to the HUF. The Tribunal rejected this claim citing the absence of joint family property and more than one coparcener. The court clarified that a HUF can exist even with a single coparcener, as per the Supreme Court's decision in C. Krishna Prasad v. CIT [1974] 97 ITR 493. The Tribunal's view that joint family property must exist for self-acquired property to become HUF property was deemed untenable, as any individual can impress their property with the character of joint family property.

The court examined the facts and determined that the properties and shares thrown into the HUF became HUF property from a specified date. Income derived after this date was excluded from the individual's income computation. The court held that the income derived post the transfer date should be excluded from the individual's assessment for the year in question. The judgment clarified the legal position regarding the constitution of a HUF and the process of impressing self-acquired property with the character of joint family property. The decision favored the assessee, allowing the exclusion of income derived after the transfer of properties into the HUF hotchpot.

In conclusion, the court ruled in favor of the assessee, excluding the income derived after the transfer date from the individual's income computation for the assessment year in question. The judgment highlighted the legal principles surrounding the formation of a HUF and the process of converting individual property into joint family property. The assessee was awarded costs for the reference, with the advocate's fee specified.