1978 (2) TMI 79 - HC - Income Tax

Inherited properties deemed separate, not joint family assets, exempt from assessment. Revenue to cover assessee's costs.

The Full Bench concluded that properties inherited by Karuppan Chettiar from his divided father constituted his separate and individual properties, not ... Hindu Law Issues Involved:1. Whether properties inherited by Karuppan Chettiar from his divided father constitute his separate and individual properties or the properties of the joint family.2. Whether the income from such properties is assessable in the hands of the Hindu undivided family (HUF).Issue-Wise Detailed Analysis:1. Properties Inherited by Karuppan Chettiar:The central issue is whether the properties inherited by Karuppan Chettiar from his father, Palaniappa Chettiar, should be considered his separate and individual properties or the properties of the joint family consisting of himself, his wife, sons, and daughters. The Tribunal held that the properties did not form part of joint family properties so that the income therefrom could be assessed as the income in the hands of the family.The Tribunal relied on the decision of the Allahabad High Court in Commissioner of Income-tax v. Ram Rakshpal Ashok Kumar [1968] 67 ITR 164 (All), which stated that properties inherited from a divided father represented the separate property or the individual property of the heir. This view was also supported by the Assam High Court in Ghasiram Agarwalla v. Commissioner of Gift-tax [1968] 69 ITR 235 (Assam).However, the Gujarat High Court in Commissioner of Income-tax v. Dr. Babubhai Mansukhbhai [1977] 108 ITR 417 (Guj) differed from the Allahabad High Court's view, suggesting that the matter required reconsideration in light of conflicting opinions.2. Income from Inherited Properties:The second issue is whether the income derived from the properties inherited by Karuppan Chettiar can be assessed as the income of the Hindu undivided family. The Appellate Assistant Commissioner initially rejected the assessee-family's contention that the said properties did not belong to the HUF but only to Karuppan Chettiar as an individual.The Full Bench referred to the conflicting opinions of the Allahabad and Assam High Courts versus the Gujarat High Court. The Allahabad High Court held that under section 8 of the Hindu Succession Act, the property inherited by a son from his father must be held as his individual property and not the income of the HUF. The Gujarat High Court, however, held a contrary view, stating that section 8 did not interfere with the scheme of Hindu law as it prevailed prior to the enactment of the Hindu Succession Act.The Full Bench noted that section 8 of the Hindu Succession Act provides for devolution of interest when inheritance opens on the death of a grandfather, which is different from the principle that obtained before the Act. The statute intends to override the established principles of Hindu Mitakshara law to the extent provided in the Act.The court concluded that Karuppan Chettiar alone inherited the properties of his father, Palaniappa, to the exclusion of his son, irrespective of whether the property was ancestral in the hands of Karuppan. Therefore, the income from such properties could not be assessed as the income of the HUF.Conclusion:The Full Bench answered the question in the affirmative, stating that the properties inherited by Karuppan Chettiar from his divided father constituted his separate and individual properties and not the properties of the joint family. Consequently, the income from such properties is not assessable in the hands of the assessee-Hindu undivided family. The revenue was directed to pay the costs of the assessee, including counsel's fee of Rs. 500.