1988 (6) TMI 92 - AT - Income Tax

Summary

Issues Involved:

1. Status of the appellant for income-tax assessment purposes.
2. Applicability of the Kerala Joint Hindu Family System (Abolition) Act, 1975 to the appellant.
3. Correctness of the assessment as a body of individuals and the application of the maximum marginal rate.

Issue-Wise Detailed Analysis:

1. Status of the appellant for income-tax assessment purposes:

The appellant filed his returns of income for the assessment years 1977-78 to 1983-84 in the status of a Hindu undivided family (HUF). However, the Income-tax Officer (ITO) assessed the appellant as a body of individuals (BOI) and applied the maximum rate applicable to a BOI. The appellant contested this assessment, arguing that he should be assessed as an HUF based on the decision of the Kerala High Court in the case of Sankaranarayanan Bhattathiripad v. ITO [1985] 153 ITR 562. The Appellate Assistant Commissioner (AAC) partially accepted the appellant's claim for the assessment years 1974-75 to 1976-77 but upheld the ITO's decision for the years 1977-78 to 1983-84. The Tribunal concluded that the appellant should be assessed in the status of an HUF for all the assessment years in question, as this status had been accepted by the department for the earlier three assessment years.

2. Applicability of the Kerala Joint Hindu Family System (Abolition) Act, 1975 to the appellant:

The ITO and the AAC relied on the Kerala Joint Hindu Family System (Abolition) Act, 1975, which abolished the joint family system among Hindus in Kerala, to deny the appellant's claim to be assessed as an HUF. The appellant argued that the Act was not applicable to him as he had migrated from Kerala to Madras in 1940 and had become a permanent resident of Tamil Nadu. The Tribunal agreed with the appellant, noting that the Act's operation was confined to the territorial jurisdiction of Kerala and could not apply to Hindus residing outside Kerala. The Tribunal cited several decisions, including Shantilal C. Shah v. CIT [1988] 169 ITR 805 (Ker.), WTO v. K. Madhavan Nambiar [1988] 169 ITR 810 (Ker.), and P.G. Narayanaswamy v. CIT [1988] 169 ITR 813 (Ker.), to support its conclusion that the Kerala Act was applicable only to Hindus residing within the State of Kerala.

3. Correctness of the assessment as a body of individuals and the application of the maximum marginal rate:

The appellant contended that even if the Kerala Act was applicable, the status of BOI taken by the departmental authorities was unsustainable. He argued that the Act brought about a statutory partition among the members of an HUF, converting joint tenancy into a tenancy-in-common, and that the shares of the members were specified and defined. Therefore, only 1/6th of the income of the HUF would be assessable in the hands of the appellant and each of the members of his family. The Tribunal, however, did not find it necessary to examine this alternative submission in detail, as it had already decided in favor of the appellant on the main issue of his status as an HUF.

Conclusion:

The Tribunal allowed the appeals, holding that the appellant should be assessed in the status of an HUF for all the assessment years 1977-78 to 1983-84. The Tribunal directed the ITO to assess the appellant in that status for all these years.