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of <h1>Court affirms tax liability for income from house properties after trust deeds declared void.</h1> <h3>S.N.R. Sundara Rao And Sons Versus Commissioner Of Income-Tax,</h3> The court upheld the validity of proceedings under Section 34 of the Income-tax Act and affirmed the tax liability of a Hindu undivided family for income ... - Issues:1. Validity of proceedings under Section 34 of the Income-tax Act for four assessment years.2. Validity of trust deeds, assessment under Section 9 of the Income-tax Act, and ownership of certain house properties by a Hindu undivided family.Analysis:1. The first issue pertains to the initiation and completion of proceedings under Section 34 of the Income-tax Act. The court found that the original assessment was based on trust deeds being enforceable. However, when a subsequent court decree set aside these trust deeds, it indicated under-assessment, justifying the validity of proceedings under Section 34. The court ruled in favor of the tax authorities, affirming the validity of the proceedings.2. The second issue revolves around the ownership of house properties by a Hindu undivided family and the impact of trust deeds being declared void. The court analyzed the nature of the alienations, which were gifts and not for value. It considered the legal principle of avoiding voidable transactions, emphasizing that avoidance renders the transaction as if it never took place. The court rejected the argument that avoidance is effective only from the date of avoidance, stating that avoidance nullifies the transaction from its inception. Consequently, the family's title revived upon avoidance of the trust deeds, making them liable for tax under Section 9 of the Income-tax Act. The court ruled in favor of the tax authorities, holding the family accountable for the income from the houses subject to the trust deeds that were set aside.In conclusion, the court upheld the validity of the proceedings under Section 34 and affirmed the tax liability of the Hindu undivided family for the income from the house properties following the avoidance of the trust deeds. The judgment favored the tax authorities, leading to costs being imposed on the assessee.
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