1969 (10) TMI 8 - HC - Income Tax

Whether the Tribunal was right in holding that by virtue of section 6 of the Hindu Succession Act, income to the extent of 4/17th thare was not includible in the assessment of the Hindu undivided family - Held, yes

Summary

Issues:
1. Whether the Tribunal was right in excluding 4/17th share from the assessment of the Hindu undivided family for the assessment year 1961-62?
2. Whether the Tribunal was right in holding that income to the extent of 4/17th share was not includible in the assessment of the Hindu undivided family for the assessment year 1960-61?

Analysis:

The case involved a reference made by the Commissioner under section 256(1) of the Income-tax Act, 1961, regarding the assessment of a Hindu undivided family's income. The deceased, Ramaswamy Setty, was a partner in two firms as the karta of the Hindu undivided family. Following his death, his share in the joint family property devolved on his widow, daughter, and three sons in equal shares, constituting 4/17th of the total share. The main issue was whether this 4/17th share of income should be assessed as part of the Hindu undivided family's income for the relevant assessment years.

The Tribunal held that under section 6 of the Hindu Succession Act, the 4/17th share devolved by succession on the heirs and, therefore, was not liable to be included in the assessment of the Hindu undivided family. The court noted that on the death of Ramaswamy Setty, the joint family's share in the firms reduced from 13/17th to 9/17th share, as per the provisions of the Hindu Succession Act. This reduction in share justified the exclusion of the 4/17th share from the family's assessment.

The argument raised by the Commissioner, contending that without a partition by metes and bounds, the income-tax department cannot recognize a mere division in status, was deemed untenable. The court clarified that the Hindu undivided family continues for income-tax purposes even after the death of a male member, with the share diminishing accordingly. The court ruled in favor of the assessee, affirming the Tribunal's decision to exclude the 4/17th share from the assessment of the Hindu undivided family for the relevant assessment years.

In conclusion, the court answered both questions in the affirmative and in favor of the assessee, directing the Commissioner to bear the costs. The judgment highlighted the application of the Hindu Succession Act and the principles governing the assessment of income in cases of succession within a Hindu undivided family, providing clarity on the treatment of shares and income post the death of a male member.