1981 (10) TMI 82 - AT - Income Tax

Summary

Issues:
1. Determination of HUF status for assessment purposes.
2. Claim of property as HUF property by brothers.
3. Conversion of property into HUF after the death of the father.
4. Assessment of property shares for tax purposes.
5. Admissibility of additional evidence in the case.

Detailed Analysis:

1. The case involved the assessment of HUF status for the assessee and the department for the assessment years 1974-75 to 1976-77. The Assessing Officer considered the property as the self-acquired property of the father and not the HUF property of the sons. The dispute revolved around the nature of the property, including income from house property, dividends, and interest.

2. The assessee claimed that the property should be treated as belonging to the HUF of the two brothers based on relinquishment of shares by the sisters in favor of the brothers. The AAC held that since both sons and daughters have equal rights in the property as per the Hindu Succession Act, the property cannot be considered as HUF of the two brothers. The AAC relied on the Supreme Court ruling in C. Krishna Prasad v. CIT [1974] 97 ITR 493.

3. The Gujarat High Court ruling in CIT v. Dr. Babu Bhai Mansukhbhai was cited to assess Manmohan Kapur's share as HUF property. The AAC held that one-fourth share of the property should be assessed as the HUF property of Manmohan Kapur and his family, while the remaining property should be treated as separate property for tax purposes.

4. Both the assessee and the department appealed the order. The department challenged the assessment of one-fourth of the property as HUF property, while the assessee contested the ruling that there was no HUF of the two brothers. The contention was that the brothers had blended their shares and treated the property as joint family property.

5. Additional evidence was admitted during the proceedings, including documents related to the deceased's property in Pakistan and the lease deed of the disputed property. However, the Tribunal found that the property was self-acquired and not ancestral. There was no evidence of conversion into HUF property after the father's death, and the property was deemed individual rather than HUF property.

6. The Tribunal rejected the claim that the property was HUF of the two brothers based on the lack of evidence of conversion or blending. The property devolved on the sons and daughters under the Hindu Succession Act, and the relinquished shares by the sisters were considered separate property of the brothers. The Tribunal followed the Madras High Court ruling that property devolving on sons and daughters remains individual property and not HUF property.

7. In conclusion, the Tribunal dismissed the assessee's appeals and allowed the departmental appeals. The AAC's order was set aside, and the original assessment by the ITO was restored.