9911796707
TMI Blog1983 (1) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... e., themselves. For the assessment years 1972-73, 1973-74 and 1974-75, the ITO did not accept the claim of the assessee that the income from the above assets were to be assessed in the hands of a HUF, consisting of himself, his wife and daughter. A protective assessment was also made on the alleged HUF. The above assessments on the individual including in his income, the income from the properties allegedly thrown into the common hotchpotch, came up on appeal before the Tribunal on the question of status. For the assessment year 1972-73, the status claimed of HUF was not accepted by the Tribunal as well. Relying on the Supreme Court decision in the case of Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, the Tribunal in IT Appeal Nos. 471 to 473 (Bom.) of 1976-77, dated 10-7-1978 held that the exercise of the assessee in throwing his personal properties into what he thought to be the family hotchpotch was an exercise in futility as it did not have any impact on the incidence of taxation, so far as his individual assessment was concerned. On the above basis the Tribunal negatived the application of section 64(2) of the Income-tax Act, 1961 ('the Act'), as claimed by the assessee with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiary of an indirect transfer for their benefit. The entire amount, therefore, was to be excluded from the assessment of the assessee. The decisions in Surjit Lal Chhabda's case, Ratilal Khushaldas Patel's case and Prem Kumar v. CIT [1980] 121 ITR 347 (All.), were cited in this connection. Even if the alleged blending was ineffective, there was a gift to the family which took away these assets and the income therefrom from the individual. 4. For the department, it is pointed out that both the gift and the alleged trust in the alternative, were illegal. If the fact of the blending of the properties is, as directed by the Tribunal, ignored, the assessee was the owner of the property. There was no HUF which could transfer this property to joint owners or a HUF for a matter of that. The settlor, according to the trust, is shown to be the assessee, his wife and the minor child. When the first act was ineffective in law in view of the above facts, according to learned counsel for the department, the trust deed itself was illegal and ineffective. It is also pointed out that there cannot be a gift in such circumstances on the lines of Pushpa Devi v. CIT [1977] 109 ITR 730 (SC). Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds, interest, rents and other income of the trust fund (hereinafter for brevity sake called 'the income' of the trust fund) and from and out of the same in the first place pay all costs, charges and expenses of and incidental to the collection thereof and all outgoings in respect of the trust fund and any immovable property or properties for the time being subject to the trusts hereof as also all costs, charges and expenses of and incidental to the execution of the trusts and powers herein contained ; (b) subject to the provisions of sub-clause (a) of this clause the trustees shall till the date of distribution hereinafter mentioned pay, appropriate or apply the whole of the income of the trust fund to the Hindu undivided family of Vasant Jagjiwan Sheth for the maintenance, residence, education, medical attendance and treatment or any purpose of emergency or urgent necessity, advancement and benefit of the Hindu Undivided Family of Vasant Jagjiwan Sheth. 2. On the expiration of 22 (twenty-two) years from the date hereof hereinafter referred to 'as the date of distribution', the trustees shall distributes, pay and transfer the trust fund, the income thereof and accretions to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er merely because the family is represented by a sole surviving coparcener who possesses rights which an owner of property may possess. For the matter of that, the same question has to be asked in cases where the family, for the time being, consists of widows of deceased coparceners as in Commissioner of Income-tax v. Rm. Ar. Ar. Veerappa Chettiar so long as the property which was originally of the joint Hindu family remains in the hands of the widows of the members of the family and is not divided amongst them. In cases failing within the rule in Kalyanji's case, the question to ask is whether property which did not belong to a subsisting undivided family has truly acquired the character of joint family property in the hands of the assessee. In this class of cases, the composition of the family is a matter of great relevance for, though a joint Hindu family may consist of a man, his wife and daughter, the mere existence of a wife and daughter will not justify the assessment of income from the joint family property in the status of the head as a manager of the joint family . . . ." 7. Other propositions which this decision lays down are : ". . . In the first place, joint famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hindu family with his wife and minor daughter. For income-tax purposes his alleged throwing of self-acquired property into the above joint family hotchpotch was not accepted for the reasons that the property 'may be usefully described as the property of the family after it was thrown into the common stock, but it does not follow that in the eye of Hindu law it belongs to the family, as it would have, if the property were to devolve on the appellant as a sole surviving coparcener'. The property in dispute in Surjit Lal Chhabda's case was thus held to be assessable in the hands of the individual assessee only for the reason that the income therefrom still remained 'his income even after the property was thrown into the family hotchpotch'. 8. Surjit Lal Chhabda's case thus clearly enunciates that a joint Hindu family can consist of a husband, wife and daughter. The family coming into existence on account of sapindaship with marriage, the husband and wife constitute a joint Hindu family. With a birth of a daughter, the daughter also becomes a member of the joint family. Even though, therefore, in the present case, following the decision in Surjit Lal Chhabda's case, the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffectiveness in law of the transfer. If the assessee be regarded as the karta of the family, perhaps it could have been sufficient in law that he signed a transfer deed, transferring the property to the trust. The fact that the wife also signed as a settlor and the father joined it as a guardian of the minor, does not alter the legal position even a little. The fact, therefore, has to be accepted that after the trust was created, these assets stood transferred to the trust. 10. The question is whether section 64 would be applicable to the case and if so to what extent. In view of the foregoing, perhaps it cannot be contested that there was an indirect transfer of the property by the individual to the trust for the benefit of the named beneficiaries. Even this would not attract the provisions, in our opinion, of section 64. The provisions of the trust deed as to distribution have been quoted above. The only purpose for which during the currency of the trust amounts could be applied is 'for the maintenance, residence, education, medical attendance and treatment or any purpose of emergency or urgent necessity, advancement and benefit of the Hindu undivided family'. That there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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