1992 (5) TMI 173 - SC - Income Tax

HUF - Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the properties inherited by Karuppan Chettiar from his divided father constituted his separate and individual properties and not the properties of the joint family consisting of himself, his wife, sons and daughters and hence the income therefrom is not assessable in the hands of the assessee-Hindu undivided family

Summary

Issues:
1. Whether the properties inherited by Karuppan Chettiar from his father constitute his separate and individual properties or properties of the joint family.
2. Whether the income derived from these properties is assessable in the hands of the assessee-Hindu undivided family.

Analysis:
The case involves a dispute regarding the assessment of income derived from properties inherited by Karuppan Chettiar. The Commissioner of Income-tax challenged the Tribunal's order, which held that the properties did not form part of the joint family properties. The Madras High Court, in an earlier case, had ruled in favor of the assessee, stating that the properties were separate and individual. Despite this, for the assessment year 1977-78, the Income-tax Officer included the income in question, citing conflicting views from different High Courts. The Appellate Assistant Commissioner upheld the assessee's claim based on the Madras High Court decision. The Department appealed to the Tribunal, which rejected the objection, citing the binding decision of the Madras High Court.

The conflict arises from differing interpretations of the Hindu Succession Act. The Allahabad High Court held that properties inherited by a male Hindu are separate property under the Act, devolving to heirs by succession. In contrast, the Gujarat High Court viewed inherited properties as representing the Hindu undivided family. The Madras High Court, in the previous case involving the same assessee, aligned with the Allahabad High Court's interpretation. The Supreme Court was approached due to the conflicting views among the High Courts, considering the question's public importance and likelihood to arise in numerous cases.

The Supreme Court, referencing a previous decision, ruled in favor of the assessee, stating that the income from the inherited properties is not assessable in the hands of the assessee-Hindu undivided family. The court's decision was based on the interpretation of the Income-tax Act and the prevailing legal principles regarding the nature of inherited properties under the Hindu Succession Act. The judgment clarified the issue and settled the dispute, providing a final resolution to the matter.