1994 (12) TMI 1 - SC - Income Tax

Section 171(1) - Whether it could thereafter be claimed that income from the property of the family had to be divided equally among the HUF members and the adopted son for purposes of Income-Tax assessment - even in the case of alienation in favour of a stranger, the court insisted on compliance with section 171

Summary

Issues:
Income tax assessment of Hindu undivided family and adopted son, interpretation of section 171 of the Income-tax Act, application of section 14(1) of the Hindu Succession Act, 1956.

Analysis:
The case involved the income tax assessment of a Hindu undivided family and an adopted son for various assessment years. The dispute arose from the differing views on how the income should be divided between the family and the adopted son for tax purposes. The Income-tax Officer initially accepted the 50:50 division in earlier years but later assessed the entire income as that of the Hindu undivided family, with a protective assessment on the adopted son. The Appellate Assistant Commissioner and the High Court upheld this view, contrary to the Tribunal's decision in favor of equal division.

The central issue revolved around the interpretation of section 171 of the Income-tax Act. The section deems a Hindu undivided family to continue as such for tax purposes unless a partition finding is recorded. The court emphasized that without a formal inquiry into partition, the family would be taxed as undivided, irrespective of the Hindu Succession Act's provisions. Previous court decisions were cited to support this interpretation, highlighting the necessity of compliance with section 171 for tax assessments.

The argument that the widow's absolute right under section 14(1) of the Hindu Succession Act should impact the tax assessment was dismissed. The court referred to precedents where compliance with section 171 was deemed essential, even in cases involving alienation of property. The court rejected the contention that the Revenue's change in stance for subsequent assessment years was impermissible, emphasizing the statutory requirements under the Income-tax Act.

In conclusion, the appeals challenging the High Court's decision were dismissed, with no order as to costs. The judgment reinforced the importance of following the procedural requirements of section 171 in determining the tax liability of Hindu undivided families, regardless of statutory property rights conferred by other laws.