1993 (2) TMI 117 - AT - Income Tax

Income from gifts to HUF assessed with donor's intention in mind

The Tribunal concluded that the income attributable to gifts given by the father to the Hindu Undivided Family (HUF) should be assessed in the hands of ... A Firm, Assessing Officer, Attributable To, Earlier Decision, High Court, Share Income Issues Involved:1. Assessment of income from the firm: Whether it should be taxed in the hands of the individual or the Hindu Undivided Family (HUF).2. Desirability of departure from the Tribunal's earlier decision.Issue-wise Detailed Analysis:1. Assessment of Income from the Firm:Facts and Background:The case revolves around the gifts made by the assessee's father to the HUF, which consisted of the assessee, his wife, and daughter. The primary question was whether the income from the firm, where the gifted amount was invested, should be taxed in the hands of the individual or the HUF.Tribunal's Earlier Decision:In its earlier decision dated 19-1-1989, the Tribunal held that the income should be taxed in the hands of the individual. This decision was based on the Supreme Court ruling in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, which stated that until a son is born, the property transferred to the family should be assessed in the hands of the individual.Assessee's Argument:The assessee's Chartered Accountant argued that the Tribunal should take a different view in light of a subsequent Full Bench decision of the Madras High Court in CIT v. M. Balasubramanian [1990] 182 ITR 117. This decision overruled an earlier Division Bench decision and supported the assessee's claim that the income should be taxed in the hands of the HUF.Department's Argument:The Departmental Representative contended that the Tribunal's earlier decision should be followed as it had considered all aspects in detail.Tribunal's Analysis and Decision:The Tribunal chose to depart from its earlier decision. It noted that the Full Bench decision of the Madras High Court in M. Balasubramanian's case clarified that the primary rule is the intention of the donor. The Tribunal found that the gifts were made with specific stipulations that they were for the HUF. It also noted that there was no contrary High Court decision available at the time.Legal Precedents and Rulings:The Tribunal cited several decisions in favor of the assessee, including:- CIT v. M. Balasubramanian [1990] 182 ITR 117 (Mad.)- Satyendra Kumar v. CIT [1983] 140 ITR 840 (Mad.)- CIT v. Radhambal Ammal [1985] 153 ITR 440 (Mad.)- CIT v. Ghansham Dass Mukim [1979] 118 ITR 930 (P&H)The Tribunal also referenced the Supreme Court decision in C.N. Arunachala Mudaliar v. C.A. Muruganantha Mudaliar [1954] SCR 243, which emphasized the donor's intention in determining the character of the property.Conclusion:The Tribunal concluded that the income attributable to the gifts given by the assessee's father to the HUF should be assessed in the hands of the HUF, not the individual. The corresponding additions in the individual's assessment were deleted.2. Desirability of Departure from the Tribunal's Earlier Decision:Tribunal's Earlier Decision:The earlier decision did not follow the Punjab and Haryana High Court decision in Ghansham Dass Mukim's case, citing that it did not appropriately consider the Supreme Court decision in Surjit Lal Chhabda's case.New Developments:The Full Bench decision of the Madras High Court in M. Balasubramanian's case provided a clarification that supported the assessee's position. It emphasized the donor's intention, distinguishing it from the Surjit Lal Chhabda case where the property was already held by the individual.Department's Argument:The Departmental Representative argued that the Tribunal's earlier decision should be followed and that the reversal of the Madras High Court's decision did not affect the Tribunal's reasoning.Tribunal's Analysis and Decision:The Tribunal found the arguments for maintaining the earlier decision unconvincing. It noted that the Full Bench decision clarified the points that were previously in doubt. The Tribunal also observed that no contrary decisions had been brought to its notice.Conclusion:The Tribunal decided that it was justified in departing from its earlier decision. It held that the income should be assessed in the hands of the HUF, aligning with the Full Bench decision of the Madras High Court.Final Judgment:The appeals by the assessee were allowed, and the income attributable to the gifts given to the HUF was to be assessed in the hands of the HUF, not the individual.