1992 (3) TMI 141 - AT - Income Tax

A Firm, Income Of HUF, Individual Income, Individual Property Into HUF Property, Inherited Property, Share Income

Summary

Issues Involved:
1. Status of share income from the firm (HUF vs. Individual)
2. Application of Section 64(2) of the IT Act
3. Assessment of Rs. 2,100 for the assessment year 1982-83
4. Assessment of income from house property for the assessment years 1983-84 and 1984-85

Issue-wise Detailed Analysis:

1. Status of Share Income from the Firm (HUF vs. Individual):
The primary issue was whether the share income from M/s Marketing & Sales Associates should be assessed in the hands of the assessee as an individual or as a Hindu Undivided Family (HUF). The Income Tax Officer (ITO) and the Assistant Appellate Commissioner (AAC) initially determined that the income should be assessed in the individual capacity of the assessee. However, the AAC later directed the ITO to treat the status of the appellant with regard to the share income from the firm as that of HUF. The Revenue did not contest this decision. The Tribunal, however, analyzed the situation and concluded that the income derived by the assessee from the firm should be assessed in the hands of the individual. This conclusion was based on the ruling in the case of Surjit Lal Chhabda v. CIT, where income from property impressed with the character of HUF property had to be assessed as individual income if the assessee had only a wife and daughter and no son.

2. Application of Section 64(2) of the IT Act:
The Tribunal examined whether the provisions of Section 64(2) of the IT Act were applicable. Section 64(2) provides that if an individual converts his separate property into property belonging to the family, the income derived from such converted property shall be deemed to arise to the individual and not to the family. The Tribunal found that even if the income from the firm was considered HUF income, the provisions of Section 64(2) would still apply, making the income assessable in the hands of the individual. The Tribunal noted that the assessee's skill and labour, which contributed to becoming a partner in the firm, could not be treated as HUF property under the Hindu Gains of Learning Act, 1930. Thus, the income from the firm had to be assessed as individual income.

3. Assessment of Rs. 2,100 for the Assessment Year 1982-83:
The assessee objected to the inclusion of Rs. 2,100 in his income for the assessment year 1982-83, claiming it was salary income from the previous year. However, the IAC (Asst.) added this amount to the income as the assessee could not prove that it had been assessed as salary income for the previous year. The Tribunal upheld this decision, as no evidence was provided to establish that the amount had already been taxed.

4. Assessment of Income from House Property for the Assessment Years 1983-84 and 1984-85:
The assessee also objected to the assessment of income from house property in his individual capacity for the assessment years 1983-84 and 1984-85. The Tribunal held that since the house property had been acquired from the share income from the firm, the income derived from the house property had to be assessed in the hands of the individual. This conclusion was reached in view of Explanation 1 to Section 64(2), which mandates that income from property acquired from converted property should be assessed as individual income.

Conclusion:
The Tribunal dismissed all three appeals filed by the assessee, holding that the share income from the firm, the amount of Rs. 2,100, and the income from house property should all be assessed in the hands of the individual.