1984 (2) TMI 216 - AT - Wealth-tax

Summary

Issues Involved:
1. Character of the property inherited by a Hindu male from his father under the Hindu Succession Act, 1956.
2. Assessment of income and wealth from the inherited property as individual or HUF (Hindu Undivided Family) property.
3. Reconsideration of the Tribunal's earlier decision based on conflicting High Court judgments.

Issue-wise Detailed Analysis:

1. Character of the Property Inherited by a Hindu Male from His Father:
The main question was whether the property inherited by a Hindu male from his father after the Hindu Succession Act, 1956, is considered separate or ancestral property for income-tax and wealth-tax assessments. The Tribunal analyzed the scope of the Hindu Succession Act, stating that the Act aims to amend and codify the law relating to intestate succession among Hindus. The preamble and Section 4 of the Act indicate that the old shastric Hindu law ceases to operate only to the extent of matters provided for in the Act. For matters not covered, the old law continues to apply. Specifically, Section 8 of the Act outlines the devolution of property but does not specify the character of the property in the hands of the inheritor. The Tribunal concluded that the property inherited by a male Hindu from his father remains ancestral property qua his sons, thus becoming HUF property for tax purposes upon the birth of a son.

2. Assessment of Income and Wealth from the Inherited Property:
The Tribunal had previously accepted the assessee's claim that the income and wealth from the inherited property should be assessed as HUF property starting from the assessment year 1971-72. This decision was accepted by the department and became final. The dispute arose again for the assessment year 1977-78 for income-tax and 1975-76 for wealth-tax. The Commissioner (Appeals) upheld the assessee's claim based on the Tribunal's earlier orders. The Tribunal reaffirmed that the character of the property inherited by the assessee from his father is HUF property, as there is no provision in the Hindu Succession Act contrary to the old shastric Hindu law regarding this situation.

3. Reconsideration of the Tribunal's Earlier Decision:
The department, relying on contrary High Court decisions, sought reconsideration of the Tribunal's earlier decision. The Pune Bench referred the matter to a larger Bench, leading to the formation of the Special Bench. The Tribunal examined various High Court judgments, noting conflicting views. Some High Courts (Allahabad, Madras, Calcutta, Madhya Pradesh, Andhra Pradesh) held that property inherited under Section 8 is separate property, while others (Gujarat, Punjab and Haryana, Allahabad) considered it ancestral property. The Tribunal emphasized that it should adopt an interpretation that appeals to it more and is favorable to the taxpayer when reasonable interpretations are possible. Given the peculiar facts of the case, including the department's acceptance of the earlier Tribunal's order and subsequent partition of the property, the Tribunal decided to treat the property and income as belonging to the HUF.

Conclusion:
The Tribunal dismissed the departmental appeals, holding that the property inherited by the assessee from his father should be treated as HUF property for income-tax and wealth-tax purposes. The Tribunal's decision was based on the interpretation of the Hindu Succession Act, the old shastric Hindu law, and the principle of favoring the taxpayer in cases of conflicting reasonable interpretations.