1974 (6) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Constitution of a Hindu Undivided Family (HUF) consisting of Bhupatrai Hirachand and his widowed mother.
2. Assessment of income from property and business in the hands of such HUF.
3. Exclusion of the half share of property income representing the interest of Bhupatrai Hirachand's widowed mother from the total income of the HUF under section 9(3) of the Indian Income-tax Act, 1922.
4. Validity of assessments under section 34(1)(b) when initiated under section 34(1)(a) of the Indian Income-tax Act, 1922.

Detailed Analysis:

1. Constitution of a Hindu Undivided Family (HUF) consisting of Bhupatrai Hirachand and his widowed mother:
The court examined whether Bhupatrai Hirachand and his widowed mother constituted a Hindu undivided family (HUF). The court noted that a "Hindu undivided family" means a joint family and not necessarily a coparcenary. It was established that Liladhar, governed by the Mitakshara school of Hindu law, left behind his widow and son, Bhupatrai Hirachand, forming a joint family. The court concluded that after Liladhar's death, the joint family continued, and the widow became a member of the joint family, which included Bhupatrai, his wife, and son. The court emphasized that the presumption of a joint family continues until proven otherwise.

2. Assessment of income from property and business in the hands of such HUF:
The court held that after Liladhar's death, the business and house property devolved upon his son and widow in equal shares. The widow became entitled to the property under the Hindu Women's Rights to Property Act, 1937. The business and property remained joint, and the income from these sources should be assessed in the hands of the HUF, subject to the qualification that only half of the property income should be assessed in the hands of the HUF due to the widow's share.

3. Exclusion of the half share of property income representing the interest of Bhupatrai Hirachand's widowed mother from the total income of the HUF under section 9(3) of the Indian Income-tax Act, 1922:
The court interpreted section 3(1) of the Hindu Women's Rights to Property Act, 1937, to determine whether the widow's share should be excluded. The court concluded that the widow's share in the property is defined and ascertainable, and thus, section 9(3) of the Indian Income-tax Act, 1922, is applicable. Consequently, the half share of the property income representing the widow's interest should be excluded from the total income of the HUF.

4. Validity of assessments under section 34(1)(b) when initiated under section 34(1)(a) of the Indian Income-tax Act, 1922:
The court addressed whether the Tribunal could sustain the validity of assessments under section 34(1)(b) despite the Income-tax Officer initiating proceedings under section 34(1)(a). The court referred to the decision in Mriganka Mohan Sur v. Commissioner of Income-tax, which upheld that if the conditions for taking action under section 34(1)(b) are fulfilled, the assessment can be justified under that clause, even if initially taken under section 34(1)(a). The court held that the Tribunal was competent to deal with the point and justified in upholding the assessment under section 34(1)(b).

Conclusion:
- Question No. (i): Yes, the widowed mother of Bhupatrai is a member of the HUF.
- Question No. (ii): Yes, but only the half share of the income from house property should be included in the income of the HUF.
- Question No. (iii): Yes, the half share of the property income representing the interest of Bhupatrai Hirachand's widowed mother should be excluded from the total income of the HUF.
- Question No. (iv): Yes, the Tribunal could sustain the validity of assessments under section 34(1)(b) even though the Income-tax Officer initiated proceedings under section 34(1)(a).