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TMI Blog2005 (8) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... his court under section 256(1) of the Income-tax Act, 1961, by the Tribunal at the instance of the assessee Dr. Prakash Sultane, in R.A. Nos. 614 and 615 (PN) of 1986 arising out of I.T.A. Nos. 1603 and 1604 (PN) of 1985 for the assessment years 1982-83 and 1981-82. "Whether, on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the income from assets received on partition dated January 1, 1972, to the extent of Rs. 15,381 for the assessment year 1981-82 and Rs. 12,242 for the assessment year 1982-83 was assessable in the hands of the assessee individual?" The factual matrix giving rise to the aforesaid question of law is as follows: The assessee is a doctor by profession. His income from profession was assessable in his hands as an individual. The assessee was a member of a bigger Hindu undivided family which was partitioned on January 1, 1972. At the time of partition and right up to January 22,1980, the assessee was a bachelor. During all these years, the income from assets on partition, was assessed in the hands of the assessee as his individual income. When the assessee got married on January 22,1980, the assessee contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess his income from the Hindu undivided family property in his individual capacity. In the above case also, the assessee had obtained the share on partition before his marriage and on his marriage, had claimed the status of Hindu undivided family. His claim was rejected on the ground that "until a son is born the status of the assessee would continue to be that of an individual". The Income-tax Officer assessed the income of the assessee from assets received by him on partition as his individual income and continued to assess the same as the assesses's individual income for the assessment years 1982-83 also. In appeal, the Appellate Assistant Commissioner was of the view that the Madhya Pradesh High Court did not correctly lay down the position of law in the case in CIT v. Vishnukumar Bhaiya [1983] 142 ITR 357 upon which the Income-tax Officer placed reliance and observed that the character of the Hindu undivided family property did not change in the hands of the assessee just because he is the sole surviving member and it cannot, therefore be given the same treatment as would be given to the self-acquired property of an individual. The Appellate Assistant Commissioner further n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was thrown into the family hotchpot." On the basis of the aforesaid observations of the Supreme Court in the said case, the Tribunal gave its own findings as follows: "Thus there is no doubt that the character of the property originating from the Hindu undivided family funds does not acquire different colours depending on the number of births and deaths in the family. At the same time, the effect of marriage, which merely entitled the wife to maintenance, does not bring about any real change. The right of the wife is not enlarged for the reason that she was married to the assessee. Not being a coparcener the wife has no right by birth in the property nor the right to demand its partition nor indeed the right to restrain the assessee from alienating the property for any purpose whatsoever." The Tribunal concluded as follows: "Thus, the event of the marriage on January 22, 1980, has not made any difference as far as Dr. Sultane is concerned." The Tribunal has also with approval referred to the distinction made by the departmental representative, in cases in which at the time of getting a share on partition, the assessee was already married and in cases where the marriage ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the aforesaid case, the following ratio has been culled: "An individual who receives ancestral property at a partition and who subsequently acquires family, but has no male issue, would hold that property only as the property of the family. Under the Hindu law the wife of the coparcener is certainly a member of the family. Whatever be the school of Hindu law by which a person is governed, the basic concept of a Hindu undivided family in the sense of who can be its members is just the same. Thus, in order to constitute a joint family, it is not always necessary that there must be two male members." In the said case, the assessee had received a share at a partition of a Hindu undivided family which was included in the hands of his father as he was a minor at that time. After he attained majority, he disclosed the share income in his return in the status of individual. When the assessee got married he filed the return and claimed the status of a smaller Hindu undivided family in respect of the share income obtained at the partition. The authorities below rejected the claim on the ground that in order to constitute a joint family it is necessary that there should be two male c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto existence and a son whether by birth or adoption is added thereto, such property continues to retain the character of joint family property even when the family is reduced to a single male member as in the case of a sole surviving coparcener. Though such a sole surviving coparcener may be assessable as an individual, as he cannot be said to have a family, unless there are in fact present female members in the family, the character of the property continues unaltered as joint family property, though for the time being it is not shared with any other member of the family and may or may not be subject to any charge in favour of anyone else for any purpose." In the said case of Parshottamdas K. Panchal [2002] 257 ITR 96, the Gujarat High Court held that reliance placed by the counsel for the Revenue on the Full Bench decision of the Patna High Court in the case of Shankar Lal Budhia [1987] 165 ITR 380 is of no avail to the Revenue as the Full Bench of the Patna High Court had no occasion to consider the two Division Bench judgments of the Gujarat High Court. Furthermore, it is contended that the Supreme Court decision in N.V. Narendranath [1969] 74 ITR 190 wherein the following o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... radesh High Court (Indore Bench) and (3) Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC). The Gujarat High Court while differing from the decision of the Patna High Court Full Bench judgment in the case of Shankar Lal Budhia [1987] 165 ITR 380 held: "that a coparcener who receives ancestral property at a partition and who subsequently acquires a family, but has no male issues would hold the property only as the property of a Hindu undivided family". The assessee has also placed reliance on the judgment of the Madras High Court in the case of W.P.A.R. Rajagopalan v. CWT [2000] 241 ITR 344, wherein the ratio of the judgment of the Supreme Court in N.V. Narendranath v. CWT [1969] 74 ITR 190 has been followed and the case of Shankar Lal Budhia [1987] 165 ITR 380 (Patna Full Bench) and Vishnukumar Bhaiya [1983] 142 ITR 357 (MP) have been dissented from. The case of Surjit Lal Chhabda [1975] 101 ITR 776 (SC) has been explained. It is pointed out that in the case of Narendranath v. CWT [1969] 74 ITR 190, the apex court held that the ancestral property allotted to a member whose family consisted of himself, his wife and his daughter was the property belonging to the Hindu undivided fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 1978-79, the returns were filed by him in the status of an individual. He got married on February 24, 1978. Thereafter, he submitted his income-tax and wealth-tax returns for the assessment year 1979-80 claiming status as Hindu undivided family in respect of the properties obtained by him in the partial partition. His status as Hindu undivided family was accepted by the Tribunal for the year 1979-80. However, for the subsequent years, i.e., 1980-81 to 1983-84, the Wealth-tax Officer did not accept the status as Hindu undivided family in respect of those properties and took the status as an individual and this was confirmed by the Tribunal. In this case, the Madhya Pradesh High Court held that the Tribunal was not justified in rejecting the assessee's claim. The assessee was assessable in the status of a Hindu undivided family for the assessment years 1980-81 to 1983-84. Thus, it is seen that the assessee has relied on the judgments of several High Courts which in turn have referred to the observations of the Supreme Court in Surjit Lal Chhabda's case [1975] 101 ITR 776 and came to the conclusion that an assessee who has received a share on partition of Hindu undivided fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,82,742 belonged to C in his individual capacity and did not constitute assets of the Hindu undivided family for purposes of wealth-tax and also that the interest of Rs. 23,330 was allowable deduction in computing the business income of the family. On a reference, the High Court affirmed the decision of the Tribunal. On appeal to the Supreme Court: Held, affirming the decision of the High Court, that since C had inherited the amount standing to the credit of his father, R, from whom he had separated by partition in relation to that asset, under section 8 of the Hindu Succession Act, 1956, that amount belonged to C in his individual capacity and did not constitute an asset of the Hindu undivided family of C and his sons. That amount could not be assessed to wealth-tax in the hands of that family and the interest credited to that amount was allowable as a deduction in computing the business income of that family." Clearly, the reliance by the Tribunal on Chander Sen's case [1986] 161 ITR 370 (SC) is wholly misplaced. Hence, the observation of the Tribunal that the event of the marriage of the assessee on January 22, 1980, did not bring about any change in the property which remai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the Act the words "Hindu coparcenary", all the more that it is not possible to say on the face of the Act that no female can be a member.' The plea that there must be at least two male members to form a Hindu undivided family as a taxable entity also has no force. The expression 'Hindu undivided family' in the Income-tax Act is used in the sense in which a Hindu joint family is understood under the personal law of Hindus. Under the Hindu system of law a joint family may consist of a single male member and widows of deceased male members, and apparently the Income-tax Act does not indicate that a Hindu undivided family as an assessable entity must consist of at least two male members." It is important to note that the property does not lose its character merely because at one point of time there was only one male member or one coparcener. The dictum that "once Hindu undivided family always Hindu undivided family" has been accepted all along. In the said case of Gowli Buddanna v. CIT [1966] 60 ITR 293, the apex court quoted with approval the following observations of the Judicial Committee of the Privy Council in the case arising from Ceylon viz. Attorney-General of Ceylon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 60 ITR 293 concluded as follows: "Property of a joint family, therefore, does not cease to belong to the family merely because the family is represented by a single coparcener who possesses rights which an owner of property may possess. In the case in hand the property which yielded the income originally belonged to a Hindu undivided family. On the death of Buddappa, the family which included a widow and females born in the family was represented by Buddanna alone, but the property still continued to belong to that undivided family and income received therefrom was taxable as income of the Hindu undivided family." Even in Surjit Lal Chhabda's case [1975] 101 ITR 776 the Supreme Court did not approve the theory that a joint family must have more than one male member. The reliance placed by the Revenue on the observations of the Supreme Court in Surjit Lal Chhabda's case [1975] 101 ITR 776 is wholly misplaced as the property there which never belonged to the Hindu undivided family was brought into the Hindu undivided family in which there was no other male member and therefore, the Supreme Court held that there was in reality no change in the character of the property. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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