1982 (10) TMI 86 - AT - Income Tax

Issues Involved:
1. Whether the income from the shares and annuity deposits should be assessed in the hands of the individual or the HUF.
2. The interpretation of the gifts made by Sir Shri Ram and their implications on the ancestral property.
3. The consistency of the revenue's approach towards similar cases.

Detailed Analysis:

1. Assessment of Income: Individual vs. HUF
The primary issue in these appeals was whether the income from shares and annuity deposits should be assessed in the hands of the individual assessee, Vinay Bharat Ram, or in the hands of his HUF. The revenue's appeals for the assessment years 1971-72 to 1974-75 contended that the AAC erred in deleting the income from the assessment of the individual on the grounds that it belonged to the HUF. Conversely, the assessee's appeals for the assessment years 1975-76 to 1978-79 argued that the Commissioner (Appeals) erred in upholding the ITO's finding that the income was rightly assessable in the hands of the individual and not the HUF.

2. Interpretation of Gifts by Sir Shri Ram
The controversy stemmed from gifts made by Sir Shri Ram to his grandsons. The Division Bench and the Special Bench of the Tribunal had conflicting views on whether these gifts were intended as individual gifts or as part of a family arrangement. The Division Bench, in its order dated 3-10-1970, concluded that the shares acquired the character of ancestral property after the birth of a son to the donee. It relied on a letter dated 5-7-1945 from Sir Shri Ram to the Board of Directors of MMLSR Ltd., interpreting it as evidence of a family arrangement.

However, the Special Bench, in its order dated 28-9-1976, disagreed, holding that the shares were received by the donees in their individual capacity and there was no subsequent blending with joint family property. The Special Bench also noted an error in the Division Bench's interpretation of the date of cash gifts, which were actually made in 1944, not 1964.

3. Consistency of Revenue's Approach
The revenue's approach to similar cases was inconsistent. While it assessed the dividend income from the gifted shares as HUF property in the cases of Lala Bansi Dhar and Lala Shri Dhar, it treated the income as individual property in the other cases. The assessee argued for a consistent approach, pointing out that the revenue had accepted the HUF status in similar cases.

Conclusion:
The Tribunal concluded that the gifts of shares made in July 1945 by Sir Shri Ram were intended for the individual benefit of the grandsons and not as part of a family arrangement. The Tribunal found itself in agreement with the Special Bench's conclusion that the shares were received by the donees as individuals and there was no subsequent blending with joint family property. Consequently, the appeals of the revenue for the assessment years 1971-72 to 1974-75 were allowed, and the appeals of the assessee for the assessment years 1975-76 to 1978-79 were dismissed.

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