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TMI Blog1991 (7) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... originally assessed in the status of a Hindu undivided family for the years 1964-65 to 1973-74. The notional income from the buildings occupied by the members of the Royal family was assessed by the Income-tax Officer in the hands of the Palace Fund Hindu undivided family. In the second appeal before the Tribunal, the Income-tax Appellate Tribunal, in I. T. A. Nos. 263 to 272/(Cochin) of 1974-75, by order dated November 25, 1975, held that the property did not belong to the Palace Fund and that the income from the property had to be excluded from assessment. The Income-tax Officer, thereafter, as a precautionary measure, assessed the notional income from the property in the hands of the Palace Fund in the status of an individual for the assessment years 1967-68 to 1971-72. In 1. T. R. Nos. 172 to 176 of 1982, we are concerned with the assessment on the Palace Fund in the status of an individual as against a Hindu undivided family. The assessee went in appeal and the Appellate Assistant Commissioner accepted the contention of the assessee that the property occupied by the members of the Royal family did not belong to the Palace Fund, and, therefore, no notional income from this prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from the properties had to be excluded from assessment in the hands of the Palace Fund. The Tribunal found that the issue raised by the Revenue is covered by the earlier order of the Tribunal in 1. T. A. Nos. 263 to 272/(Cochin) of 1974-75 dated November 25, 1975. It made no difference as to whether the status assigned to the assessee is that of an individual or that of a Hindu undivided family; since whatever be the status, an individual or a Hindu undivided family or any other status, the income in respect of the property must first accrue to "the assessee" for it to be assessed to income-tax in the hands of "the assessee". Before the Tribunal, it was contended that, under section 27(ii) of the Income-tax Act, 1961, since the Palace Fund is an impartible estate, the assessment can be made as an individual. But, the Tribunal found that the question does not arise at all, as the finding of the Appellate Assistant Commissioner as well as the Tribunal in the earlier case as also in the present case was that the properties had to be excluded from assessment. Dissatisfied with the decision of the Income-tax Appellate Tribunal, the Revenue filed a reference application under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not assessable to income-tax under section 22 of the Income-tax Act, 1961 ? 5. Whether, on the facts and in the circumstances of the case, the finding of the Income-tax Appellate Tribunal that the accessions, alterations, improvements and extensions and also the independent cottage type houses are not owned by the assessee and that, therefore, the income therefrom is not assessable to income-tax under section 22 of the Incometax Act, 1961, is unreasonable and wrong in law, especially when the Tribunal has found that these are investments and assets of the assessee ?" Thus, we are concerned in I. T. R. Nos. 172 to 176 of 1982 with the assessment on "the Palace Fund" for the years 1967-68 to 1971-72, as individual, on the notional income from the properties reserved for the members of the royal family for their use at the time of integration, and in 1. T. R. No. 15 of 1986 with the assessment in respect of the income from the same properties in the hands of the assessee for the year 1976-77 as Hindu undivided family. From the original order of the Tribunal in I. T. A. Nos. 263 to 272/ (Cochin) of 1974-75, a question was referred under section 256(2) of the Act, viz. : "Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l has not considered the scope and impact of the said enactment, it has misdirected itself in law warranting interference with its finding. It is in the above circumstances that this court declined to answer the question and remanded the matter to the Tribunal to consider the scope of the Palace Fund (Partition) Act on the assessee for the assessment in question on the petitioner in the status of a Hindu undivided family for the assessment years 1964-65 to 1973-74. Since, in both sets of cases, the Tribunal followed only the earlier order of the Tribunal which was set aside in I. T. R. Nos. 215 to 224 of 1979 and the matter was remanded, we would have followed the same decision in these cases also and remanded the cases for fresh disposal. But, counsel on behalf of the assessee submitted that the Tribunal disposed of the appeal after remand for the assessment years 1964-65 to 1973-74 by its order dated January 30, 1987, in which the scope and impact of the two enactments, viz., the Palace Fund (Partition) Act (Act 16 of 1961) and the Palace Fund Partition (Amendment) Act (Act 15 of 1978) have been considered. According to the Tribunal, the 1961 Act has only done away with the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned. Original Petition No. 8439 of 1988 relates to the assessment year 1974-75. There also, there is a prayer to compel the Income-tax Appellate Tribunal to refer similar questions of law. Since the assessee's appeals were allowed and the appeals of the Revenue were dismissed for the assessment years 1964-65 to 1973-74, there are two original petitions filed by the Revenue for each year. A brief sketch of the family law of Cochin royalty has been made by the Supreme Court in two decisions Rama Varma Bharathan Thampuran v. State of Kerala, AIR 1979 SC 1918 and Palace Administration Board v. Rama Varma Bharathan Thampuran, [1980] Supp. SCC 234 ; AIR 1980 SC 1187. After independence, when princely States were sought to be integrated into India, the independent States of Cochin and Travancore first integrated themselves into the Travancore-Cochin State with effect from July 1, 1949. Two days before the constitutional merger, the Maharaja of Cochin issued a proclamation to provide for the impartibility, administration and preservation of the Royal Estate and the Palace Fund through a board of trustees. This was by a Royal Proclamation of 1124. That proclamation made the Palace Fund an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Valiamma Thampuran Kovilakam Estate and the Palace Fund (Partition) and the Kerala joint Hindu Family System (Abolition) Ordinance, 1978, to direct partition of the Palace Fund among all the members entitled to a share of the Estate and Palace Fund under section 4 of the Kerala joint Hindu Family System (Abolition) Act, 1975, and such direction should be published by the Board in the Gazette. Sub-section (2) of section 3 provided that, if the senior most male member fails to direct the Board as required by sub-section (1), the Board shall, on the expiry of the period specified in that sub-section, proceed to effect the partition of the Estate and the Palace Fund among the members referred to in sub-section (1) and the partition so effected shall be valid notwithstanding anything contained in section 17 of the Proclamation. The effect of this amendment is that the Board has to effect the partition with effect from December 1, 1976. The cumulative effect of the two decisions of the Supreme Court aforementioned is to explain that the Palace Fund has become partible on satisfying certain conditions under the 1961 Act and the division has taken place under the 1978 Act with effect fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment of the Palace Fund and whether the income from these properties has to be excluded from the assessment for the assessment years concerned, viz., 1964-65 to 1973-74 ? " referred to this court. Examining the case in I. T. R. Nos. 215 to 224 of 1979, as already stated, this court refused to answer the question. But, by setting aside the finding of the Tribunal, remitted the matter to the Tribunal for fresh disposal of the issue taking into account the scope and effect of the two enactments mentioned above. No other invalidity was pointed out by this court. As already stated, the two enactments had only affected the question of the status of the assessee. They cannot have any bearing on the question whether the income from the house properties in the possession and occupation of the members of the royal family is liable to be assessed in the hands of the assessee-Palace Fund. Income-tax shall be charged in respect of the total income of the previous year of every person. "person" shall include, under section 2(31) of the Act, Hindu undivided family as well. If any impartible estate is owned by a joint Hindu family, under section 27(ii) of the Act, the holder of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cannot be alienated or leased out. It is repeated therein that when any of them is not required for the use of the members of the ruling family, it will revert to the State. The assessments in question, it is admitted, relate to the deemed income from the abovesaid items. The assessee is the Palace Fund and the Palace Fund gets possession of the property with the above direction. Further, by the order of the Government of Kerala dated June 24, 1964, it was ordered after examining the matter that the local and municipal tax on the buildings under the control of the Palace Administration Board is a charge on the State revenues and, therefore, directed that the property tax demanded by the municipalities and panchayats in respect of the Palace under the control of the Palace Administration Board, Tripunithura, Cochin, be paid by the State Government. It is true that the President of the Palace Administration Board, in his memorandum to the Chief Minister of Kerala, dated April 7, 1972, requested for a declaration that these properties should be considered as belonging to the junior members of the Cochin royal family. But no such declaration bid been made. Therefore, the fact remai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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