1989 (4) TMI 134 - AT - Income Tax

Summary

Issues Involved:

1. Ownership of the property and validity of family settlement under Mohammedan Law.
2. Extent of investment and period of construction for income-tax purposes.
3. Treatment of advance rent and credit purchases in the computation of investment.

Issue-wise Detailed Analysis:

1. Ownership of the Property and Validity of Family Settlement under Mohammedan Law:

The primary issue was whether the assessee could claim a one-fifth share in the rental income from the property, based on a family settlement agreement dated 9-7-76. The I.T.O. determined that the assessee was the exclusive owner of the property, rejecting the claim of shared ownership. The I.T.O. pointed out that the assessee had previously shown a one-third share in the property and that the land on which the building stands was her exclusive property, acquired in exchange for her Meher land. The I.T.O. argued that Meher is the exclusive and absolute property of a married Mohammedan lady, and thus, the assessee was the sole owner of the property. The C.I.T.(Appeals) upheld this view, stating that the concept of family arrangement is alien to Mohammedan law and is a special feature of Hindu undivided families.

However, the appellate tribunal found that the family arrangement should be upheld to bring about family peace and avoid future disputes. It was noted that the family arrangement was registered and signed by all parties, including the husband of the assessee. The tribunal referred to various legal precedents and principles, emphasizing that family arrangements should be supported to maintain harmony and avoid litigation. It was concluded that the family arrangement was valid, and the assessee's claim of shared ownership was accepted.

2. Extent of Investment and Period of Construction for Income-Tax Purposes:

The I.T.O. computed the total income of the assessee, treating her as the sole owner of the property, and worked out the amount of investment made in the construction up to the year under consideration. The assessee argued that the construction spread over several years and that investments were made using materials purchased on credit. The C.I.T.(Appeals) rejected these claims due to the absence of supporting evidence.

The tribunal found that the matter had been processed without proper appreciation of facts and required verification of the period and duration of the construction work. It was deemed necessary to ascertain the investment made during each specific year for accurate income-tax assessment. Consequently, this part of the matter was remanded to the Assessing Officer for fresh disposal after specific verification and inquiries.

3. Treatment of Advance Rent and Credit Purchases in the Computation of Investment:

The assessee claimed that advance rent received from the government and other parties was utilized in the construction, and that various building materials were obtained on credit. The I.T.O. did not give credit for these claims due to the lack of supporting materials like credit bills and other details.

The tribunal noted that the assessing authorities did not properly verify these claims and that the matter required further investigation. It was directed that the Assessing Officer should re-examine the claims regarding advance rent and credit purchases and dispose of the matter afresh in accordance with the law, after giving the concerned parties opportunities of being heard.

Conclusion:

The appeal by the assessee was treated as partly allowed. The tribunal upheld the validity of the family settlement under the principles of law, allowing the assessee's claim of shared ownership. The issues regarding the extent of investment and the treatment of advance rent and credit purchases were remanded to the Assessing Officer for further verification and fresh disposal.