1984 (4) TMI 113 - AT - Income Tax

Agricultural Land, Family Hotchpot, Held By Assessee, Impartible Estate, Income From House Property, Individual Property, Minor Child

Issues Involved:
1. Applicability of the provisions of section 4(6) of the Wealth-tax Act, 1957 and section 27(ii) of the Income-tax Act, 1961.
2. Effect of the Orissa and Madras Abolition Acts and notifications thereunder.
3. Status of properties obtained under Ryotwari tenure post-abolition.
4. Validity and effect of deeds of partition and settlement.
5. Inclusion of income and wealth from transferred properties in the hands of the assessee.
6. Assessment status of the assessee as an individual or HUF.

Issue-wise Detailed Analysis:

1. Applicability of Provisions of Section 4(6) of the Wealth-tax Act, 1957, and Section 27(ii) of the Income-tax Act, 1961:
The tribunal examined whether the value of the assets and the income therefrom should be included in the hands of the assessee where the assessment has been made in the status of an individual. The tribunal noted that the repeal of the Madras Impartible Estates Act was complete and not partial, thus the impartibility of the estate came to an end with the abolition of the estates. Consequently, the fictions under section 4(6) of the Wealth-tax Act and section 27(ii) of the Income-tax Act do not operate.

2. Effect of the Orissa and Madras Abolition Acts and Notifications Thereunder:
The tribunal considered the earlier decision of the Cuttack Bench which held that the repeal of the Madras Impartible Estates Act was partial. However, upon reconsideration, it was concluded that the repeal brought about by the Madras and Orissa Abolition Acts was total. The tribunal emphasized that the estates vested in the State and the erstwhile impartible estates in the hands of particular individuals were extinguished.

3. Status of Properties Obtained Under Ryotwari Tenure Post-Abolition:
The tribunal concluded that lands and buildings obtained on patta after the introduction of the Ryotwari System did not retain the character of impartibility. The properties regranted by the Government to the assessee did not partake of the nature of compensation for the resumption of the estate, thus they were not impartible estates.

4. Validity and Effect of Deeds of Partition and Settlement:
The tribunal observed that the deeds of partition and settlement executed on 10-6-1965 and 22-9-1972 were valid and evidenced an unequivocal declaration that the properties were HUF properties. The properties were treated as joint family properties from the relevant date of the documents, thus not hit by the provisions of section 4(1) of the Wealth-tax Act or section 64 of the Income-tax Act.

5. Inclusion of Income and Wealth from Transferred Properties in the Hands of the Assessee:
The tribunal held that the Commissioner was not justified in including the income and wealth of the properties transferred to the wife, minor sons, minor daughter, and family deities in the hands of the assessee. The properties were considered joint family assets from 10-6-1965, and the partitions and settlements were valid.

6. Assessment Status of the Assessee as an Individual or HUF:
The tribunal concluded that the assessee was not the absolute owner of the properties post-abolition and the properties were joint family properties. The assessments made in the status of an individual were not justified, and the properties should be assessed as HUF properties.

Conclusion:
The tribunal allowed IT Appeal No. 718 (Hyd.) of 1981, setting aside the Commissioner's order under section 263 of the Income-tax Act for the assessment year 1976-77, and restored the order of the ITO. IT Appeal No. 791 (Hyd.) of 1981 and WT Appeal Nos. 383 and 384 (Hyd.) of 1981 were dismissed, upholding the decisions of the Commissioner of Income-tax (Appeals) and the Commissioner of Wealth-tax (Appeals).

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