9911796707
TMI Blog1993 (6) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------------------------------ | | | Sri C. Prakash Agarwal Sri C.Vinay Agarwal Sri C. Ajay Agarwal | | | Smt. Leela Devi Agarwal Smt. Manjari Agarwal Smt. Ranjani Agarwal (wife) (wife) (wife) | | | (1) Master Arun Agarwal (1) Master Shivendra Agarwal Master Nitin Agarwal (son) (son) (son) (2) Master Amit Agarwal (2) Baby Abha (son) (daughter) (3) Baby Anuradha (daughter) Each of the four heads of the respective branches constitutes a H. U. F., the head acting as its manager. Thus there are 4 HUFs within the bigger H. U. F., namely, (1) Shri Chunnilal Agarwal, (2) Shri C. Prakash Agarwal, (3) Shri C. Vinay Agarwal, and (4) Shri C. Ajay Agarwal. It is the case of the assessee that the assessee-H.U.F. consisted of the branches headed by Shri Chunnilal & Shri Prakash. It is the further case of the assessee that Shri Kamal Kishore Bihari had made cash gift of Rs. 4,000 to Shri Chunnilal and by the confirmatory letter addressed to Shri Chunnilal dated 30-7-1975 it is stated that the said gift shall be owned and held by him as the property of the Hindu joint family of which he shall be the Karta and Shri Prakash as the coparcener to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment by the Income-tax Officer gives rise for a revision under section 263 of the Income-tax Act. He, therefore, sent notice dated 2-2-1990 to show cause why the assessment order for the above years should not be revised under section 263 and why status of the assessee should not be determined as AOP instead of H. U. F. The assessee filed his objections for the proposed action of the Commissioner of Income-tax. The assessee raised the following objections. Firstly it was contended that since returns were filed under Amnesty Scheme, there was no justification to make probing or roving enquiries regarding the status of the assessee. The incomes were declared by the assessee for the relevant assessment years and they were not being utilised to explain any investment either in its own case or in the case of any other person. Secondly it was contended that the status was correctly claimed and determined as that of H.U.F. Prior to the receipt of gift by the assessee-H.U.F., there was in fact a coparcenary existing between the members of the donee family. No joint family was created by means of gift. On the contrary, the gift was made to the existing members of the joint family. Such gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax return filed under Amnesty Scheme. 7. Next he took up for consideration the nature of the joint family, whether it is a creature of law or created by a contract. He held that it is only a creature of law and cannot be brought about by any act of parties. In support of this proposition, he relied upon the Full Bench decision of the Madras High Court in P.C. Balasanjanna v. Fourth GTO [1972] 86 ITR 748 in which it held, inter alia, as follows, at page 750: "Some only of the members of a joint family cannot group themselves into an independent unit as a joint family within the larger unit. The Hindu undivided family, a corporate body with its heritage is purely a creation of law and cannot be grouped by act of parties. Of course, some members may divide themselves off from the corporate body and leave the rest of the members of the corporate body united." The learned Commissioner of Income-tax distinguished the A.P. High Court's decision in the case of A. Hanumantha Rao from the facts of the case before him. Ultimately he held that in the instant case before him, the different groups of relatives such as father, one or more sons or two or more brothers had admittedly utilised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he branches of Chunnilal and his three sons, namely, Prakash, Vinay and Ajay are being separately assessed in the status of specified H.U.Fs. by the assessing officer, Ward No. 3(3) under G.I.R. Nos. C-203, P-216, V-209 and A-207. Shri Chunnilal, Shri Vinay and Shri Prakash were partners in their individual capacity in M/s. Bharat Metal Box. Co., Hyderabad and are assessed by the Asstt. Commissioner of Income-tax, Central Circle-I, Hyderabad, Shri Ajay in his individual capacity is assessed by the Income-tax Officer, Ward-3(3), Hyderabad under G.I.R. No. A-907. In the Amnesty returns which were all filed on 28-3-1987, the same male members of the family to the exclusion of one or more of the other male members were purported to have received some gifts from third parties to be enjoyed by them and not by others. Shri K.V.S. Bhaskara Rao, learned advocate for the assessee contended that whether it has got property or not, the bigger H.U.F. constituted by Shri Chunnilal and his three sons is valid under law. In the bigger H.U.F. there are at least four branches, one branch represented by the father and the other three branches represented by his three sons respectively. The question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escended from a common ancestor and includes their wives and unmarried daughters, and the Hindu coparcenary, which is narrower body within the joint family consisting of persons, who acquire by birth an interest in the joint or coparcenary property, are creatures of law and cannot be created by act of parties save insofar that by adoption a stranger may be introduced as a member thereof. It must, however, be remembered that a joint Hindu family springs from a Hindu male and every Hindu male can be the stock of a fresh descent constituting a joint Hindu family or a Hindu coparcenary. Where from a Hindu male a joint Hindu family springs into existence, this family goes on having its different branches and sub-branches. Each branch starts with the male descendant of the common ancestor and each sub-branch with the male descendant of the head of the branch. While the entire groups proceeding from the common ancestor with its several branches and sub-branches in the normal undivided estate is a Hindu joint family, each of the branches and each of the sub branches again is a Hindu joint family according to the concept of a joint family under the Hindu law. It is, therefore, possible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier years the existence of smaller H. U. F. was accepted but later for assessment year 1957-58 the Department refused to recognise the smaller H.U.F. within a larger H.U.F. which can hold property as a unit to the exclusion of the larger H. U. F. and that separate property of any of the coparceners of the larger H.U.F. can be impressed with the character of joint family property of the smaller H. U. F. 11. In Satyendra Kumar's case the facts of the case in brief are that S gave funds belonging to himself to her son A with the intention that the money should be used for the benefit of the entire family. With the funds so provided as a nucleus, A did business and also acquired various properties in his name as well as in the names of others utilising the money derived from the business and from the properties acquired therefrom. Certain disputes which arose in the family were referred to arbitration and the award of arbitration was filed in the High Court and a decree in terms thereof was passed. Under the terms of the award which was entered in the decree, the properties which were acquired with the funds provided by S to A were divided by metes and bounds and allotted to all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m a cheque for Rs. 10,000 and cash of Rs. 100. Contemporaneously, he gave him a letter stating that the benefit of these sums should go to his wife and children when he got married and that he should enjoy it as a Hindu undivided family. The gift was accepted by the assessee. The assessee was a bachelor at the time of the gift. Subsequently, he married and during the relevant assessment year namely, 1972-73, he had a wife and a daughter. The Revenue wanted to treat the income from the sums gifted as individual income under the Income-tax Act and the sums and accretions thereto as individual properties under the Wealth-tax Act. The assessee claimed that the properties and income therefrom were assessable as belonging to his Hindu undivided family. His claim was accepted by the Tribunal. On a reference: Held, (i) that the income from the gifted properties arose to the Hindu undivided family and could not be clubbed with the assessee's individual income: (ii) that for purposes of wealth-tax, the sum of Rs. 2,61,136 belonged to the Hindu undivided family and was not assessable in the hands of the assessee in his individual capacity." 14. Thus Shri K.V. S. Bhaskara Rao contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was stated to have been laid down into the Supreme Court's decision in the case of Bhagwan Dayal v. Reoti Devi AIR 1962 SC 287. It is contended on the basis of the above authority that all the authorities cited by Shri K.V. S. Bhaskara Rao do not support the proposition for which they were cited or do not support the proposition that two branches of H. U. F. can constitute a H.U.F. Therefore, the learned Departmental Representative submitted that the Commissioner of Income-tax is perfectly justified, in revising the orders of the assessing officer and directing the Income-tax Officer to consider the donees or settlees as constituting an association of persons. Shri K.V. S. Bhaskara Rao in his reply stated that multiple H. U. Fs may be postulated within the frame of a larger H. U. F. He says for example that if some heads of the branches relinquish their shares, others may automatically constitute a H. U. F. with regard to the relinquished property. In this case, the donor's intention was that different branches of H.U.F. should enjoy the gifted properties as H.U.F. properties. The gift or settlement was made in favour of all the members comprised in two branches of a H. U. F. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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