1976 (12) TMI 48 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal was correct in excluding the income from a specific property from the total income of the assessee for the assessment years 1964-65 and 1965-66.
2. Whether the unilateral act of the assessee impressing the property with the character of joint family property constitutes a transfer under section 63(b) of the Income-tax Act, 1961, and if so, whether the income arising from the property should be assessed in the hands of the assessee.

Analysis:
1. The judgment pertains to the exclusion of income from a property owned by the assessee for the assessment years 1964-65 and 1965-66. The assessee executed a will designating the property as belonging to the Hindu undivided family, which was contested by the department. The court, relying on a previous decision, upheld that the property became joint family property immediately upon the unilateral act of the assessee, and hence, the income from it should not be included in the assessee's wealth and income for tax purposes. The Tribunal's decision was deemed correct for the assessment year 1964-65 based on the previous ruling.

2. In the assessment for the year 1965-66, the department contended that the unilateral act of impressing the property with joint family character constituted a transfer under section 63(b) of the Act, making the income assessable in the hands of the assessee. The Tribunal rejected this argument, stating that the act did not fall under the definition of a revocable transfer as per section 63(a). The Tribunal reasoned that the unilateral act did not grant the assessee the power to reassume any portion of the property, as the power to demand a partition was inherent in Hindu law and did not stem from the initial act of impressing the property with joint family character. Therefore, the Tribunal's conclusion was upheld, ruling in favor of the assessee and against the department for the assessment year 1965-66. The court emphasized that a transfer is revocable only if the transfer itself reserves a power for the benefit of the transferor, which was not the case in this scenario.