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TMI Blog2002 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, the Tribunal was right in interpreting the implication of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440, the Supreme Court decision and consequently holding that there was a notional partition on the death of the karta/deceased and, therefore, the ancestral/Hindu undivided family property did not belong to the Hindu undivided family as the Hindu undivided family did not survive? 2. Whether, on the facts and in the circumstances of the case, the Tribunal should have directed assessments of 4/5ths of the capital gains excluding only the share of the deceased, Shri Digambar Hari Ranade? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in consequence of question No.1, in holding that the notice under section 148 was untenable in law since the Hindu undivided family did not exist, and that the capital gains arising on the sale of the Hindu undivided family property was not taxable in the Hindu undivided family's hands?" The brief facts relevant for the purpose herein are as follows: Mr. Digambar Hari Ranade (since deceased) became an owner of the immovable property situated at 1381, Shukrawar Peth, Pune, pursuan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice or to the city municipal corporation; that the release deed from the married daughter, Mrs. Vidya N. Phadke, dated June 12,1975, was filed subsequent to the agreement for sale dated June 5,1975. For all the aforesaid reasons, the Income-tax Officer held that there was no partition of the Hindu undivided family and, therefore, on the sale of the property, the capital gains tax was liable to be assessed in the hands of the Hindu undivided family. On appeal, the Commissioner of Income-tax (Appeals) upheld the contention of the assessee and cancelled the notice issued under section 148 of the Income-tax Act on the ground; firstly, that the Hindu undivided family was never assessed to tax so far and, therefore, the question of claiming for any partition under section 171 of the Income-tax Act did not arise, secondly, there was no income assessable in the hands of the Hindu undivided family and, thirdly, the Income-tax Officer had already taxed the capital gains arising out of the sale of the immovable property, in the hands of the individuals. Even on the merits, the Commissioner of Income-tax (Appeals) held that in the light of the decision of the apex court in the case of Gurup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act did not arise at all. He submitted that all the facts relevant for the purpose of the assessment were there before the Income-tax Officer at the time of the original assessment of the individual legal heirs, including the fact that the capital gains taxes arising out of the sale of the immovable property have been paid by the legal heirs in their individual capacity and the same has been duly assessed. Accordingly, it was submitted that the orders passed by the authorities were justified and no interference is called for. We have heard counsel on both sides. As regards the first question is concerned, the apex court in the case of Gurupad Khandappa Magdum [1981] 129 ITR 440 had laid down the proposition that when a female member who inherits an interest in the joint family property under section 6 of the Hindu Succession Act, files a suit for partition expressing her willingness to go out of the family, then, she would be entitled to get both the interest she has inherited and the share she would have been notionally allotted to her, as stated in Explanation 1 to section 6 of the Hindu Succession Act. The apex court in the case of State of Maharashtra v. Narayan Rao Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the Revenue. However, the facts of the present case, as enumerated by the authorities below, clearly show that the Hindu undivided family was never assessed to tax and on the death of Digambar Ranade, the legal heirs have mutually decided amongst themselves as to who shall inherit the estate of the deceased and got their names recorded in the city survey records and municipal records. This fact is corroborated by the release deed executed by the married daughter of the deceased. Thus, the facts on record establish that on the death of Digambar Ranade in the year 1965, each of the four legal heirs were holding 1/4 th share in the estate of the deceased as tenants in common and that in the year 1975 they agreed to sell their respective 1/4 th share to M/s. A.V. Apte and Co. The Income-tax Officer has held that the Hindu undivided family was in existence all through, because in the agreement for sale entered into with M/s. A.V. Apte and Co., the legal heirs have stated that each of them are selling 1/4 th share in the Hindu undivided family property. In our opinion, mere use of the words "Hindu undivided family property" in the agreement for sale cannot be the basis for hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, no material is adduced to show that the Hindu undivided family was in existence when the sale of the immovable property took place in the year 1975. The Income-tax Officer at the time of original assessment of the co-sharers on the basis of the documents on record, accepted their contention and held that the capital gains arising out of the sale of the immovable property are liable to be assessed in the hands of the individual co-sharers. There is neither failure on the part of the co-sharers to disclose any material facts nor is there any income escaping assessment. Therefore, in the facts of this case, the capital gains have been rightly assessed in the hands of the individuals and not in the hands of the Hindu undivided family. Once it is held in the facts of the present case, that the capital gains on the sale of the immovable property are not taxable in the hands of the Hindu undivided family, the notice issued. Under section 148 of the Income-tax Act cannot be sustained. Accordingly, we answer question No.3 in the affirmative and in favour of the assessee. To sum up, we answer the questions referred as follows: Question No.1 is answered in the negative, that is, i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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