1994 (12) TMI 58 - HC - Income Tax

Interpretation of 'Hindu Undivided Family' under Income-tax Act - Broad definition upheld

KY. Patel Versus Commissioner Of Income-Tax

KY. Patel Versus Commissioner Of Income-Tax - [1995] 214 ITR 793, 128 CTR 25 Issues Involved:1. Applicability of Section 64(2) of the Income-tax Act, 1961.2. Interpretation of the term 'Hindu undivided family' in Section 64(2).Detailed Analysis:1. Applicability of Section 64(2) of the Income-tax Act, 1961:The central question was whether the Tribunal was justified in holding that the provisions of Section 64(2) were applicable in the case of the assessee. The assessee, an individual deriving income from various sources, had converted his foreign shares into joint family property by a declaration dated March 28, 1970. During the assessment years 1975-76 and 1976-77, the Income-tax Officer included the foreign dividends in the assessee's income based on Section 64(2), which was contested by the assessee.The Tribunal upheld the Income-tax Officer's decision, stating that Section 64(2) applied to the conversion of separate property into joint family property, regardless of whether the individual was the karta of the family. The Tribunal found no ambiguity in the language of Section 64(2) and held that the entire income from the converted property was taxable as the income of the individual from the assessment year 1976-77 onwards due to the amendment effective from April 1, 1976.2. Interpretation of the Term 'Hindu undivided family' in Section 64(2):The assessee argued that Section 64(2) should apply only if the transfer was made to a joint family of which the individual was the karta. The assessee contended that the term 'Hindu undivided family' in Section 64(2) referred specifically to a family comprising the individual, his spouse, and minor children, and not a larger family including parents or brothers.The court examined the provisions of Section 64(2) and found that the language was clear and unambiguous. The court noted that the term 'Hindu undivided family' has a well-known connotation in Hindu personal law, encompassing all persons lineally descended from a common ancestor, including their wives and unmarried daughters. The court rejected the assessee's argument for a restricted interpretation, stating that there was no basis or justification for limiting the meaning of 'Hindu undivided family' to a specific type of family.The court further emphasized that the legislative intent behind Section 64(2) did not support the assessee's restricted interpretation. The court held that the expression 'Hindu undivided family' should be understood in its ordinary sense, as used in the Income-tax Act and Hindu personal law.Conclusion:The court concluded that the provisions of Section 64(2) of the Income-tax Act, 1961, were applicable to the assessee's case. The court affirmed the Tribunal's decision and held that the term 'Hindu undivided family' in Section 64(2) should be interpreted in its ordinary sense, encompassing a broader family structure. The question referred to the court was answered in the affirmative and in favor of the Revenue. No order as to costs was made.