1966 (1) TMI 22 - SC - Income Tax

Whether the family property can properly be described as 'joint property' of the undivided family. ? Held that - Property of a joint family, therefore, does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may possess. In the case in hand the property which yielded the income originally belonged to a Hindu undivided family. On the death of Buddappa, the family which included a widow and females born in the family was represented by Buddanna alone, but the property still continued to belong to that undivided family and income received therefrom was taxable as income of the Hindu undivided family. The High Court was therefore right in recording their answers referred for opinion. In this case we express no opinion on the question whether a Hindu undivided family may for the purpose of the Indian Income-tax Act be treated, as a taxable entity when it consists of a single member---male or female. Appeal dismissed.

Issues Involved:
1. Constitution of a Hindu Undivided Family (HUF) under the Income-tax Act.
2. Correctness of the assessment of income in the hands of the HUF.
3. Authority of the Appellate Assistant Commissioner to correct the status.

Detailed Analysis:

1. Constitution of a Hindu Undivided Family (HUF) under the Income-tax Act
The primary issue was whether the sole male surviving coparcener of a Hindu joint family, along with his widowed mother and sisters, constitutes a Hindu undivided family within the meaning of the Income-tax Act. The court held that under section 3 of the Income-tax Act, a Hindu undivided family is an assessable entity, distinct from a Hindu coparcenary. A Hindu joint family includes all persons lineally descended from a common ancestor, their wives, and unmarried daughters. The court cited Kalyanji Vithaldas v. Commissioner of Income-tax, where it was observed that the phrase "Hindu undivided family" is used in the statute with reference to all schools of Hindu law, not just one. Therefore, a joint Hindu family can consist of a single male member and the widows of deceased coparceners. The court concluded that the plea requiring at least two male members to form a Hindu undivided family as a taxable entity has no legal basis.

2. Correctness of the Assessment of Income in the Hands of the HUF
The appellant contended that he should have been assessed as an individual, not as a Hindu undivided family, and that the Income-tax Officer was precluded by the proviso to section 26(2) from passing the order of assessment for the year 1951-52 against him. The court rejected this contention, stating that under Hindu law, a joint family may consist of a single male member and the widows of deceased male members. The court referred to the Finance Act, 1951, which sets out the rates of income-tax payable by individuals, Hindu undivided families, unregistered firms, and other associations of persons. The court clarified that the schedule sets out the limits of exempted income and does not imply that a Hindu undivided family must consist of at least two members entitled to claim partition.

3. Authority of the Appellate Assistant Commissioner to Correct the Status
The appellant argued that the Appellate Assistant Commissioner was not entitled to correct the status. The court held that the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal were correct in their assessment. The court emphasized that the property yielding the income originally belonged to a Hindu undivided family. On the death of Buddappa, the family, which included a widow and females born in the family, was represented by Buddanna alone, but the property still continued to belong to that undivided family. Thus, the income received from the property was taxable as the income of the Hindu undivided family.

Conclusion
The High Court was right in recording affirmative answers to all the questions referred for opinion. The appeal was dismissed with costs, and the court expressed no opinion on whether a Hindu undivided family may be treated as a taxable entity when it consists of a single member, male or female.

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