1973 (4) TMI 44 - HC - Income Tax

HUF Property Status Upheld: Share Incomes & Net Wealth Excluded from Individual Assessments

Additional Commissioner Of Income-Tax, Punjab Versus Inder Singh Uppal

Additional Commissioner Of Income-Tax, Punjab Versus Inder Singh Uppal - [1975] 98 ITR 368 Issues Involved:1. Whether the share incomes from Sovereign Knit Works and Sunrise Woollen and Silk Mills belonged to a Hindu undivided family (HUF) and consequently had to be excluded from the assessments of the assessee made in the status of 'individual' for the assessment years 1964-65, 1965-66, and 1966-67.2. Whether the net wealth to the extent of Rs. 1,17,908 belonged to a Hindu undivided family and consequently had to be excluded from the assessment to wealth-tax for the assessment year 1965-66.Issue 1: Share Incomes from Firms and Individual AssessmentThe assessee was assessed to Income-tax as an individual for the assessment years 1964-65, 1965-66, and 1966-67. The income included amounts received from Sovereign Knit Works and Sunrise Woollen & Silk Mills, which the assessee claimed were earned as the karta of his Hindu undivided family (HUF). The Income-tax Officer did not accept this claim and included the income in the assessee's individual assessment. However, the Appellate Assistant Commissioner accepted the assessee's contention, holding that the income belonged to the HUF and could not be included in the individual's income. The Income-tax Appellate Tribunal upheld this decision, relying on the Supreme Court's judgment in N. V Narendranath v. Commissioner of Wealth-tax, which validated the transaction of throwing self-acquired property into the common hotch-pot of the HUF.The Tribunal referred the question of law to the High Court: 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the share incomes from Sovereign Knit Works and Sunrise Woollen and Silk Mills belonged to a Hindu undivided family and consequently had to be excluded from the assessments of the assessee made in the status of 'individual' for the assessment years 1964-65, 1965-66 and 1966-67Rs.'The High Court affirmed the Tribunal's decision, emphasizing that a joint family can consist of one male member along with female members and that property once belonging to the HUF continues to bear that character even if the number of male members is reduced to one. The Court rejected the revenue's argument that the property must be ancestral or already joint family property to be considered HUF property. The Court cited the Supreme Court's decision in Gowli Buddanna v. Commissioner of Income-tax, which held that property of a joint family does not cease to belong to the family merely because the family is represented by a single coparcener.Issue 2: Net Wealth and Wealth-tax AssessmentIn the wealth-tax reference, the question was whether the net wealth of Rs. 1,17,908 belonged to the HUF and should be excluded from the wealth-tax assessment for the assessment year 1965-66. The assessee claimed that he had impressed his self-acquired property with the character of HUF property. The Income-tax Officer did not accept this claim, stating that the assessee was not a partner in the capacity of karta of an HUF but in his individual capacity. However, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal accepted the assessee's claim, holding that the property belonged to the HUF.The High Court upheld this decision, stating that the existence of joint family property before a member throws his self-acquired property into the common stock is not necessary. The Court cited the Supreme Court's decision in Goli Eswariah v. Commissioner of Gift-tax, which held that the act of throwing self-acquired property into the common stock is a unilateral act that does not require acceptance by the family.Conclusion:The High Court concluded that the decision of the Appellate Assistant Commissioner, upheld by the Income-tax Appellate Tribunal, was correct. The share incomes from the firms and the net wealth of Rs. 1,17,908 were correctly considered as belonging to the HUF and excluded from the individual assessments of the assessee. The Court answered the questions of law in the affirmative, in favor of the assessee and against the revenue, and awarded costs of Rs. 400 to the assessee.