1981 (12) TMI 47 - AT - Income Tax

Tribunal upholds CIT(A)'s orders, exempts income from City Palace; validates capital loss claim

INCOME TAX OFFICER. Versus HH. SHRI BHAGWAT SINGHJI.

The Tribunal dismissed the departmental appeals and upheld the CIT(A)'s orders and the assessee's claims. The income from Mewar House was not included in ... - Issues Involved:1. Inclusion of income from Mewar House in the assessee's hands.2. Capital loss claimed by the assessee for the assessment year 1971-72.3. Nature of house properties-whether they belong to the assessee individually or to the joint family.4. Exemption under Section 10(19A) for income from City Palace.5. Loss claimed for the curio shop in the City Palace for the assessment year 1972-73.Issue-Wise Detailed Analysis:1. Inclusion of Income from Mewar House:The primary issue was whether the income from Mewar House should be included in the assessee's hands for the assessment years 1971-72 to 1973-74. The property was jointly owned by the assessee and his younger brother, with the assessee holding a half share. The assessee claimed to have sold his half share to his son effective from 1st April 1970, but the sale deed was not registered until 17th May 1976. The Income Tax Officer (ITO) included the income in the assessee's hands because the document was not registered at the time of assessment. The CIT (A) accepted that the possession was given to the purchaser from 1st April 1970, and thus, no income should be assessed in the assessee's hands from that date. The Tribunal upheld this view, citing the Supreme Court decision in Ramasaran vs. Domale Daur and the Calcutta High Court decision in CIT vs. Ganga Properties Ltd., which established that a sale deed is operative from the date of execution. Therefore, the income from Mewar House was not includible in the assessee's hands for the years 1972-73 and 1973-74.2. Capital Loss for Assessment Year 1971-72:The second issue concerned the capital loss claimed by the assessee for the assessment year 1971-72. Since the sale deed was registered in 1976 and related back to 5th August 1970, the Tribunal held that the sale took place on that date. Consequently, the assessee's claim for capital loss had to be considered for the assessment year 1971-72. The Tribunal found no infirmity in the CIT(A)'s order on this point.3. Nature of House Properties:The third issue was whether certain house properties belonged to the assessee individually or to the joint family. The properties in question were inherited by the assessee from his father, the late Maharaj Bhopal Singhji, who was the Ruler of Mewar State before its merger with India. The assessee declared on 1st April 1969 that these properties belonged to the Hindu Undivided Family (HUF). The ITO contended that the properties belonged to an impartible estate and could not be thrown into the HUF common hotch-potch. However, the Tribunal referred to a decision of the Delhi Bench in the case of Bhawani Singh, Legal heir of H.H. Sawai Man Singh, which established that after the merger of the ruler's territories with India, the ruler became an ordinary citizen subject to Hindu Law. The Tribunal concluded that the assessee had the right to impress these properties with the characteristics of HUF, and thus, the income from those properties could not be included in his hands from 1st April 1969 onwards.4. Exemption Under Section 10(19A) for Income from City Palace:The fourth issue involved the exemption under Section 10(19A) for income from the City Palace, which was used as the assessee's residence but later converted into a hotel. The ITO did not accept the assessee's claim for continued exemption after the conversion. However, the CIT(A) held that the assessee would continue to enjoy the exemption. The Tribunal upheld this view, citing an earlier decision of the Jaipur Bench, which allowed the exemption for the assessment year 1971-72. The provision was amended effective from 1st April 1972, and the assessee would no longer be entitled to the exemption if the property was not used for his occupation.5. Loss Claimed for Curio Shop in City Palace:The final issue was the loss claimed by the assessee for a curio shop in the City Palace for the assessment year 1972-73. The ITO rejected the loss claim due to a lack of details, but the CIT(A) accepted it. The Tribunal found that the details of the opening stock, sales, and the damaged goods sold were provided and ascertainable from the trading account. Therefore, the Tribunal found no merit in the department's contention and upheld the CIT(A)'s order.Conclusion:In conclusion, the Tribunal dismissed the departmental appeals on all grounds, upholding the CIT(A)'s orders and the assessee's claims regarding the inclusion of income from Mewar House, the capital loss for the assessment year 1971-72, the nature of house properties, the exemption under Section 10(19A) for income from City Palace, and the loss claimed for the curio shop.