1965 (11) TMI 39 - SC - Income Tax

Whether, in the circumstances of the case, the Tribunal was justified in assessing the income of the minors in the hands of the guardians as the income of a Hindu undivided family? Held that - Section 40 plainly applies to the facts of this case and consequently the guardians have to be assessed, treating the minors as constituting a Hindu undivided family. In the result, the appeal is accepted and the question referred to the High Court is answered in the affirmative. Appeal allowed.

Summary

Issues:
1. Assessment of minors' income in the hands of guardians as income of a Hindu undivided family.

Detailed Analysis:
The case involved an appeal against the judgment of the High Court of Assam regarding the assessment of minors' income in the hands of guardians as the income of a Hindu undivided family. The deceased, governed by the Mitakashara school of Hindu law, left behind two minors and a widow. The guardians were appointed for the minors, and separate accounts were maintained for each minor. The Income-tax Officer initially assessed the guardians under section 23(3) read with section 41 of the Act. The Appellate Assistant Commissioner set aside the assessment, directing two separate individual assessments for the minors. However, the Income-tax Appellate Tribunal restored the original assessment, describing the status of the assessee as a Hindu undivided family. The High Court held that the guardians should be taxed on the separate income of each minor, as they received the shares of the minors in the profit of the business individually.

The contention raised was whether the guardians should be assessed as a Hindu undivided family or individually under section 40 of the Act. The revenue argued that the guardians should be taxed as a Hindu undivided family, while the respondents contended that the minors would have been assessed individually. The court noted that the appointment of guardians for the minors had not been challenged, and both parties acted on the assumption of its validity. The court emphasized that the order issued after the assessment year had no impact on the assessment for that year. The court also highlighted that until a partition of the joint family property was legally established, it would remain joint family property.

Referring to relevant case law, the court concluded that section 40 of the Act applied to the case, requiring the assessment of the guardians treating the minors as constituting a Hindu undivided family. Therefore, the court allowed the appeal, answering the question referred to the High Court in the affirmative, and directed the appellant to receive costs.