1978 (12) TMI 10 - HC - Income Tax

High Court rules properties self-acquired, not joint family, income assessed individually

Commissioner Of Income-Tax, Central, Madras Versus MR Pratap

The High Court determined that the properties in question were self-acquired by the two brothers and retained their individual character, not becoming ... HUF Issues Involved:1. Status of the assessee as 'individual' or 'Hindu Undivided Family (HUF)'.2. Assessment of income from properties as belonging to HUF or individual.3. Impact of filing a return in the name of the family on the status of the assessee.Issue-wise Detailed Analysis:1. Status of the Assessee as 'Individual' or 'HUF':The primary issue was whether the assessee should be assessed as an 'individual' or as a 'HUF'. The assessee initially filed returns as an individual but later revised them claiming HUF status, arguing that the properties were allotted to him at a partition among the heirs of Rajagopal Naidu and Rangiah Naidu. The Tribunal accepted the HUF status, but the High Court disagreed. The Court emphasized that the properties in question were self-acquired by the two brothers and not ancestral. The document dated July 29, 1958, was a family arrangement, not a partition of joint family property. Thus, the properties retained their individual character, and the assessee's status remained that of an individual.2. Assessment of Income from Properties:The income from the properties, including dividends and sitting fees, was disputed whether it should be assessed in the hands of the HUF or the individual. The Tribunal held that the properties were joint family properties and thus the income should be assessed as HUF income. However, the High Court found that the properties were self-acquired and not ancestral, and the family arrangement did not transform them into joint family properties. Therefore, the income should be assessed in the hands of the individual.3. Impact of Filing a Return in the Name of the Family:The Tribunal considered the revised return filed by the assessee as an act of abandonment in favor of the family, thereby changing the status to HUF. The High Court rejected this, stating that the revised return filed on March 17, 1966, could not affect the assessment years 1963-64 and 1964-65. The Court also noted that the act of filing a revised return did not constitute an unequivocal declaration to impress the properties with the character of joint family property for the relevant assessment years.Conclusion:The High Court concluded that the properties in question were self-acquired by the two brothers and retained their individual character. The family arrangement dated July 29, 1958, did not convert these properties into joint family properties. Consequently, the assessee's status remained that of an individual, and the income from the properties should be assessed in his hands as an individual. The High Court answered all three questions in the negative and against the assessee, awarding costs to the department.