1985 (6) TMI 43 - AT - Income Tax

Summary

Issues:
1. Whether the family settlement should be considered as a partial partition or not.
2. Whether the share income earned by a family member should be clubbed in the hands of the assessee-HUF.

Detailed Analysis:
1. The appeals before the Appellate Tribunal ITAT Amritsar for the assessment years 1979-80 and 1980-81 revolved around the controversy of whether a family settlement constituted a partial partition. The revenue contended that the family settlement should be treated as a partial partition, while the assessee-HUF argued that it was a distinct legal concept. The ITO initially treated it as a partial partition, but the AAC accepted the assessee's stance that it was a family settlement, not falling under the purview of partial partition as per Hindu law. The AAC also noted that even if it was considered a partial partition, the relevant provision of section 171(9) was not applicable as it was not in effect at the time of the settlement.

2. The core issue in the case was whether the share income earned by a family member should be clubbed in the hands of the assessee-HUF. The assessee argued that the income should not be clubbed as it arose from the individual efforts of the family member and not the HUF. The AAC ruled in favor of the assessee, stating that the share income earned by one family member and the interest earned by others should not be clubbed in the hands of the assessee-HUF for the assessment year 1980-81. However, no relief was granted for the assessment year 1979-80, as the AAC's order only pertained to 1980-81. The Tribunal upheld the AAC's decision for 1980-81, rendering the revenue's appeal for 1979-80 moot.

In conclusion, the Tribunal affirmed that the family settlement in question constituted a partial partition and that the provisions of section 171(9) were rightly applied for the assessment year 1980-81. The share income earned by individual family members was not to be clubbed in the hands of the assessee-HUF for that year. As for the assessment year 1979-80, the section 171(9) could not be invoked, but there was no dispute regarding the income inclusion for that year. Therefore, the revenue's appeal for 1979-80 was deemed infructuous, while the appeal for 1980-81 was allowed in favor of the assessee-HUF.