1979 (3) TMI 31 - HC - Income Tax

Court rules HUF transfers not taxable under Section 9(2)(a)(iv)

The court held that Section 9(2)(a)(iv) of the Tamil Nadu Agricultural Income-tax Act did not apply to transfers made by the assessee as the karta of a ... Agricultural Income Tax, Income Tax Act Issues Involved:1. Applicability of Section 9(2)(a)(iv) of the Tamil Nadu Agricultural Income-tax Act, 1955.2. Ownership and character of the property transferred.3. Whether the property belonged to a Hindu Undivided Family (HUF) or the individual.4. Validity of the Board of Revenue's order to include the gifted lands in the assessee's assessment.Issue-wise Detailed Analysis:1. Applicability of Section 9(2)(a)(iv) of the Tamil Nadu Agricultural Income-tax Act, 1955:The primary issue was whether Section 9(2)(a)(iv) of the Act, which mandates the inclusion of assets transferred to minor children in the assessee's total agricultural income, applied in this case. The Board of Revenue argued that the lands gifted to the assessee's minor daughters should be included in his assessment under this section. The assessee contended that the gift was made in his capacity as the karta of a HUF, not as an individual, and thus Section 9(2)(a)(iv) was not applicable.2. Ownership and Character of the Property Transferred:The court had to determine the ownership and character of the property at the time of transfer. The assessee claimed that the lands were part of a HUF property, obtained through a partition between himself and his brothers. The Board of Revenue, however, contended that the property was transferred by the assessee in his individual capacity.3. Whether the Property Belonged to a Hindu Undivided Family (HUF) or the Individual:The court examined whether the property was HUF property or individual property. Citing precedents from the Privy Council and the Supreme Court, the court noted that a HUF could exist with a single male member and female members, such as minor daughters. The court referenced cases like Kalyanji Vithaldas v. CIT and Gowli Buddanna v. CIT, which established that property obtained on partition retains its character as HUF property.4. Validity of the Board of Revenue's Order to Include the Gifted Lands in the Assessee's Assessment:The court scrutinized the Board of Revenue's order to include the lands gifted to the minor daughters in the assessee's assessment. The court concluded that the property in question was indeed HUF property. Therefore, the transfer was an act of the joint family, not an individual transfer, making Section 9(2)(a)(iv) inapplicable. The court also referenced the decision in K. Arunachalam Mudaliar v. Commr. of Agrl. I.T., which supported the view that Section 9(2) applies only to individual transfers and not to HUF property transfers.Conclusion:The court held that the provisions of Section 9(2)(a)(iv) did not apply to the transfers made by the assessee in his capacity as the karta of a HUF. Consequently, the Board of Revenue's order to include the gifted lands in the assessee's assessment was set aside. The tax cases were allowed with costs, and the counsel's fee was set at Rs. 250.