1982 (5) TMI 112 - AT - Income Tax

Summary

Issues:
Dispute over the status of income returned by the assessee - whether to be assessed as HUF or individual.

Analysis:

1. The primary issue in this appeal before the Appellate Tribunal ITAT Indore was the determination of the status in which the income returned by the assessee should be assessed. The property in question was initially purchased by the father of the assessee and later passed on to the assessee upon the father's demise. The assessee claimed the status to be that of HUF, while the Income Tax Officer (ITO) concluded that since the property was acquired by the father using his own funds, it should be considered the individual property of the assessee. The Assessing Officer of Income Tax (AAC) upheld this decision on appeal, rejecting the assessee's argument that the property was purchased using ancestral capital. Consequently, the assessee appealed to the ITAT.

2. During the appeal hearing, the assessee's representative referred to Section 6 of the Hindu Succession Act, which outlines the devolution of property in cases of a male Hindu's death. The commentary by Dr. Gyan Prakash and Mulla's Commentary emphasized the preservation of the doctrine of acquisition of rights by birth and the right of survivorship in Mitakshara coparcenary properties. These references were made to support the assessee's claim regarding the property in question.

3. The Department cited a judgment of the Allahabad High Court in CWT vs. Chander Sen, highlighting that under Section 8 of the Hindu Succession Act, the property of a deceased father devolves on his son in his individual capacity, not as the Karta of his family. The Department argued that a previous Tribunal decision supported this interpretation, stating that income from the deceased's estate should be assessed in the hands of legal heirs individually.

4. After careful consideration of the facts and legal precedents, the ITAT agreed with the assessee's position. It distinguished the Allahabad High Court judgment by noting specific circumstances involving partition, emphasizing the fundamental principle of Hindu Law that inherited property is ancestral and HUF property. The ITAT also referenced conflicting judgments from various High Courts and Tribunals, supporting the assessee's claim. Ultimately, the ITAT allowed the appeal, directing the ITO to reconsider the assessment in light of their observations.

5. The ITAT clarified that the case in question did not fall under the proviso to Section 6 of the Hindu Succession Act, as it did not involve specified female relatives. Therefore, the property purchased by the father could be treated as HUF property in the family of the assessee and his children. Additionally, since the assessee had already been assessed individually for that year without including the income from the disputed property, the ITAT allowed the appeal and remanded the case to the ITO for a fresh decision.

In conclusion, the ITAT ruled in favor of the assessee, emphasizing the ancestral and HUF nature of inherited property and directing a reassessment by the ITO based on the observations made during the appeal.