1979 (6) TMI 98 - AT - Income Tax

Summary

Issues: Character of properties devolved on the assessee individual on the death of his mother.

In this case, the primary issue revolves around the character of the properties, specifically a house and agricultural lands, which devolved on the assessee individual upon his mother's death. The dispute arose when the Income Tax Officer (ITO) sought to include the income from these properties in the individual assessment of the assessee, contending that they were not part of the Hindu Undivided Family (HUF) but belonged to the assessee individually. The ITO based his decision on a settlement deed executed by the father of the assessee, which granted life interest to the mother and stipulated that the properties would pass to the sons and their heirs after her demise, thereby considering the properties as individual assets.

Upon appeal, the Commissioner found that the properties were ancestral in nature as they were inherited by the male issue from the father, even though they were received after the mother's life interest. Citing Mulla's Hindu Law, the Commissioner directed the ITO to exclude the income from these properties from the individual assessment of the assessee. The Department challenged this decision, arguing that the mother's disposing powers over the property made her the absolute owner, thereby converting the properties into individual assets for the heirs. Conversely, the assessee's counsel supported the Commissioner's decision, emphasizing that the properties retained their ancestral character despite the mother's life interest.

The Tribunal analyzed the settlement deed and the intention of the father, concluding that the properties, though temporarily losing their ancestral nature due to the settlement on the mother, regained their ancestral status upon devolution to the sons as per the deed's terms. The Tribunal highlighted that the properties were to be jointly held by the sons and their heirs, indicating a continuation of the HUF status. Drawing parallels with legal precedents, the Tribunal affirmed the Commissioner's order to exclude the income from these properties from the individual assessment of the assessee, thereby upholding the ancestral nature of the properties and their assessment under the HUF. Consequently, the appeal by the Department was dismissed, and the cross-objection by the assessee was allowed, affirming the decision in favor of the assessee.