2001 (7) TMI 86 - HC - Income Tax

Inherited Property Taxed as Individual, Not HUF: High Court Decision

The High Court of Delhi ruled that the property inherited by the assessee should be taxed as that of an individual, not as a Hindu undivided family (HUF). ... Individual Income Issues:1. Interpretation of the status of the assessee as Hindu undivided family or individual for tax assessment purposes.Analysis:The High Court of Delhi was presented with a question by the Income-tax Appellate Tribunal regarding the correct status of the assessee for tax assessment in the assessment year 1975-76. The dispute arose from the inheritance of a sum by the assessee from his father's estate. The Assessing Officer contended that the amount inherited should be considered the individual property of the assessee, while the assessee declared it as income of the Hindu undivided family (HUF). The Appellate Assistant Commissioner, relying on a decision of the Gujarat High Court, determined the status as that of the HUF. This decision was upheld by the Tribunal, leading to the reference to the High Court.The Revenue argued that under the Hindu Succession Act, 1956, the property inherited by the assessee should be taxed as that of an individual, not as an HUF. Referring to the Supreme Court's decision in CWT v. Chander Sen, it was highlighted that the son acquires a share in the father's property by birth itself and that the property devolves on the son in his individual capacity under the Act. The Supreme Court had also previously rejected the view that income from assets inherited by a son should be assessed as income of the son individually, rather than as part of the HUF.Considering the arguments and legal precedents, the High Court ruled against the assessee, stating that the property inherited by the assessee should be taxed as that of an individual, not as an HUF. The Court referred to the decisions of the Supreme Court and reiterated that the income from assets inherited by a son should be assessed as the income of the son individually, in line with the provisions of the Hindu Succession Act, 1956. As a result, the question was answered in the negative, favoring the Revenue and against the assessee. The reference was thus disposed of by the High Court of Delhi.