1991 (7) TMI 117 - AT - Income Tax

Summary

Issues:
1. Whether the interest income earned from gifted amounts should be assessed in the hands of the Hindu Undivided Family (HUF) or the individual.
2. Whether the fact that there is only one male member in the HUF affects the assessment of income.
3. Application of legal principles regarding the ownership of gifted property in an HUF.

Detailed Analysis:
1. The case involved the assessment of interest income earned by a Hindu Undivided Family (HUF) from gifted amounts. The Income Tax Officer (ITO) initially assessed the income as that of the individual, not the HUF, due to the absence of a second male member and ancestral property in the family. The Deputy Commissioner of Income Tax (Appeals) directed the ITO to assess the income in the hands of the HUF, considering that the gifts were made to the HUF. The issue was whether the income should be assessed in the individual's capacity or that of the HUF.

2. For the assessment year 1983-84, a similar situation arose where the ITO treated the interest income as that of the individual, not the HUF. The Deputy Commissioner of Income Tax (Appeals) directed the ITO to treat the income as that of the HUF, following the decision for the previous assessment year.

3. The Department appealed to the Tribunal, arguing that the income from gifted funds should be assessed in the individual's capacity due to the HUF having only one male member. The Tribunal considered the facts and legal precedents, including the Surjit Lal Chhabda case, which established that income from gifted property would be assessed in the individual's capacity until the birth of a son. The Tribunal concluded that as the HUF had only one male member at the time of the gifts, the income should be assessed in the individual's hands. The Tribunal set aside the Deputy Commissioner's order and restored the ITO's decision to assess the interest income in the hands of the individual.

In conclusion, the Tribunal allowed the appeals, ruling that the interest income earned from the gifted amounts should be assessed in the individual's capacity rather than that of the HUF, considering the absence of a second male member in the family at the time of the gifts.