1965 (11) TMI 25 - SC - Income Tax

Whether the assessment of the income of the assessee other than his salary in the hands of the assessee as an individual and not as a Hindu undivided family till 11th December 1952 for the assessment year 1953-54 is valid? Held that - We would not be justified in introducing uncertainties and anomalies in the working of the Act by introducing this doctrine for the purpose of section 3 of the Act. Apart from the difficulty of reconciling this doctrine with the scheme of the Act Mr. Sastri has not been able to satisfy us that any rights of the son are being affected by not recognising his existence for the purposes of section 3 of the Act till he is actually born. Income-tax is a liability and it could not have been the intention of the legislature to impose a liability on persons yet unborn. Even if a Hindu undivided family was in existence towards the end of the accounting year still the whole income received or accrued in the accounting year did not thereby become the assessable income of the Hindu undivided family. Till the child was born the income which accrued to or arose to or was received by the assessee was his income. The Act disregards subsequent application of income and profits once they have arisen. When the income and profits arose they belonged to the assessee as no Hindu undivided family was then in existence. This position cannot be displaced by the birth of the son which brought into existence a Hindu undivided family. Appeal dismissed.

Summary

Issues:
1. Validity of assessing income of the assessee as an individual or Hindu undivided family for the assessment year 1953-54.

Analysis:
The case involved a dispute regarding the assessment of income of the appellant, referred to as "the assessee," as an individual or as a Hindu undivided family for the assessment year 1953-54. The appellant, being the youngest son of T. V. Sundaram Ayyangar, was a member of a Hindu undivided family that underwent a partial partition, resulting in the appellant acquiring certain assets. The contention was whether the income from all sources, excluding salary, should be assessed in the hands of the Hindu undivided family, which the appellant claimed came into existence around March 1952 when his son was conceived. The Income-tax Officer, however, recognized the family only from the date of the child's birth in December 1952. The Appellate Assistant Commissioner and the Appellate Tribunal also ruled against the assessee, leading to the matter being referred to the High Court of Madras.

The legal counsel for the assessee argued that according to Hindu law, a son conceived has property rights similar to a living son, and a Hindu undivided family comes into existence from the date a son is conceived. On the other hand, the Attorney-General representing the revenue acknowledged the doctrine of Hindu law but contended that it applies for specific purposes and may not align with the provisions of the Income-tax Act. The court referred to a previous judgment highlighting the limitations of applying Hindu law doctrines universally, especially in matters beyond property rights. The court emphasized the practical implications of applying such doctrines in the context of income tax assessment, stressing the need for a visible entity to whom income accrues for taxation purposes. The court also pointed out the challenges in filing tax returns and determining the status of an unborn child in the prescribed forms, indicating the impracticality of applying the Hindu law doctrine in this scenario.

The court further rejected the argument that the status of a Hindu undivided family should be considered based on the existence of the child at the end of the accounting year, emphasizing that income accrued or received by the assessee before the birth of the child remained his individual income. The court concluded that the income tax liability cannot be imposed on unborn persons and upheld the decision of the High Court in favor of the revenue. The appeal was dismissed, affirming the assessment of the assessee's income as an individual rather than a Hindu undivided family for the relevant assessment year.