1978 (11) TMI 98 - AT - Income Tax

Summary

Issues:
1. Whether the status of the assessee should be considered as Hindu Undivided Family (HUF) or individual for assessment years 1971-72 and 1973-74.

Detailed Analysis:
The appeals were filed by the Revenue challenging the order of the AAC, which held that the status of the assessee was HUF and not individual for the relevant assessment years. The assessee, a partner in a firm, had undergone a partial partition of the HUF in 1965, after which a partnership firm was formed with equal shares given to each member of the HUF, including minor sons and wife. The returns were initially filed as an individual, but later revised to show the status as HUF. The assessments for the years 1971-72 and 1973-74 were completed in the status of an individual, despite the returns being filed as HUF. The AAC canceled the assessments in the status of an individual and held that the proper status of the assessee was an HUF, concluding that the share income of minors could not be included under section 64 of the Income Tax Act.

The AAC based the decision on various Tribunal decisions, including ITO vs. Ram Kishore Agarwal, ITO vs. Shri Shambhulal, and WTO vs. Shri M.L. Agarwal, which held that even after a partial partition, the share income from a firm constituted by former HUF members would be considered income of the HUF consisting of the Karta and his wife. The Tribunal found that the matter was fully covered by these decisions and cited Supreme Court decisions like Gowli Budanna vs. CIT and N.V. Narendranath vs. CWT to support the view that the income belonged to the HUF.

The departmental representative argued that each partner owned the assets individually after the partial partition and formation of the partnership firm, suggesting that the proper status should be individual. However, the Tribunal rejected this argument, emphasizing the continued existence of the HUF consisting of the assessee and his wife, as established in previous decisions. The Tribunal dismissed the appeals, upholding the finding of the AAC that the status of the assessee was HUF for the relevant assessment years.

In conclusion, the Tribunal affirmed the consistent view that the income from the partnership firm should be considered as belonging to the HUF, rejecting the Revenue's contention that the assets were owned individually by each partner after the partial partition. The appeals were dismissed, maintaining the status of the assessee as HUF for the assessment years in question.