1981 (2) TMI 129 - AT - Income Tax

Summary

Issues:
1. Determining the status of income from property received by individuals after partition - whether assessable as separate income or as HUF income.

Detailed Analysis:
The judgment involves two appeals by different assessees, both sons of a common father, who constituted a HUF until they executed a deed of partition to separate and form smaller HUFs. The dispute revolves around the income from the property received by the individuals post-partition, with the assessees claiming it to be their separate income while the Income Tax Officer (ITO) assessed it as HUF income.

The Tribunal's order in the assessee's case for the assessment year 1974-75 led to the Appellate Authority confirming the assessment in the status of HUF for the assessment year 1977-78. Subsequently, a Division Bench referred the matter to the President for constituting a Special Bench for reconsideration of the earlier decision.

The Special Bench delves into legal propositions related to HUF and partition under Hindu law, emphasizing that the status of the person enjoying the income from a property is determined by analyzing the nature of rights of all individuals having an interest in the income. The judgment highlights the distinction between total and partial partition and asserts that the character of property received post-partition depends on the specific circumstances.

The judgment extensively discusses various legal precedents cited by the parties, dissecting their applicability to the present case. It distinguishes cases where the property remained joint family property due to interests of other family members post-partition from cases where the property was held as individual due to complete separation.

Ultimately, the Special Bench concludes that the assessees' status should be considered individual, not HUF, based on the fact that they reside with their separated wives, and the property received post-partition, which included shares for the wives, is deemed individual property. As a result, the appeals are treated as allowed, establishing the individual status of the assessees for the purpose of income assessment.