Hindu Undivided Family Denied Tax Benefits Under Income-tax Act

Anam Venkata Krishna Reddy Versus Commissioner Of Income-Tax

Anam Venkata Krishna Reddy Versus Commissioner Of Income-Tax - [1988] 172 ITR 425, 72 CTR 16, 36 TAXMANN 95 Issues:
1. Whether the Income-tax Appellate Tribunal was legally right in permitting the Income-tax Officer to raise a new plea for the first time in an appeal filed by the assesseeRs.
2. Whether the capital gain derived from the sale of the assessee's residential house is exempt under section 54 of the Income-tax Act, 1961Rs.

Analysis:
The case involved two questions referred by the Income-tax Appellate Tribunal to the High Court of Andhra Pradesh. The first issue was regarding the legality of allowing the Income-tax Officer to introduce a new plea in the appeal filed by the assessee. The second issue pertained to the exemption of capital gain from the sale of the assessee's residential house under section 54 of the Income-tax Act. The assessee, a Hindu undivided family, sold a property and claimed exemption under section 54 by purchasing another property within one year. However, the Income-tax Officer rejected the claim as the purchase was made beyond one year. The Tribunal, following decisions of other High Courts, interpreted 'within one year' to mean within the next calendar year, thereby considering the requirement satisfied. Yet, the Tribunal dismissed the appeal on the grounds that a Hindu undivided family cannot benefit from section 54, a new argument raised by the Revenue at the Tribunal stage.

Regarding the legal proposition that Hindu undivided families are not entitled to section 54 benefits, the court affirmed the position. Section 54 specifies conditions applicable to individuals only, as supported by decisions of other High Courts. The court noted that the assessee could not now claim that a portion of the property was the separate property of the karta under the Hindu Succession Act, as this contention was not raised earlier and could not alter the basis of the assessment. The court emphasized that the assessee cannot change the return filed and the assessment basis at a later stage, especially when the argument was not presented before the Tribunal. Therefore, the court concluded that the assessee cannot reopen the assessment and upheld the Tribunal's decision, ruling in favor of the Revenue and against the assessee on both issues.

In conclusion, the High Court answered both questions in favor of the Revenue, affirming that the Hindu undivided family was not entitled to the benefits under section 54 of the Income-tax Act. The court emphasized the importance of consistency in arguments throughout the assessment process and upheld the Tribunal's decision, denying the assessee's attempt to change the assessment basis at a later stage.