Dayabhaga Hindu Undivided Family status supports separate assessment of rental income, preventing its duplication in individual assessment.

A Hindu Undivided Family remains a recognised separate taxable unit for a Bengali assessee governed by Dayabhaga law. The notes state that Dayabhaga status alone cannot invalidate an HUF or justify assessing its rental income again in the individual's hands, particularly where the family arrangement, prior partition, and earlier tax treatment recognised the HUF. As no judicial precedent supported denial of HUF status solely on this basis, the rental-income addition in the individual assessment was unsustainable. The addition was to be deleted, while permitting assessment of the income in the HUF's hands in accordance with law.

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Issues: Whether the assessee's rental income could be assessed in his individual hands on the ground that, being governed by Dayabhaga law, a Bengali could not validly constitute or continue a Hindu Undivided Family.

Analysis: The dispute turned on the validity of the tax authorities' view that no Hindu Undivided Family could exist for a Bengali assessee governed by Dayabhaga law, and therefore the rent offered in the hands of the HUF had to be assessed again in the individual assessment. The record showed that the assessee had specifically relied on the historical recognition of the family arrangement, prior partition, and earlier tax treatment including acceptance of partition under Section 171(3) of the Income-tax Act, 1961. The authorities below cited no judicial precedent for denying HUF status on the sole basis of Dayabhaga law. The governing legal position, as recognised in binding precedent, was that a Hindu Undivided Family is a recognised taxable unit even in the case of persons governed by Dayabhaga law. On that basis, the foundation of the addition of rental income in the individual hands of the assessee failed.

Conclusion: The addition of rental income in the individual hands of the assessee was unsustainable; the issue was decided in favour of the assessee, and the deletion of the addition was directed, with liberty to the Assessing Officer to proceed in the hands of the HUF in accordance with law.

Ratio Decidendi: A Bengali assessee governed by Dayabhaga law cannot be denied recognition of a Hindu Undivided Family as a separate taxable unit merely on that ground; income belonging to such HUF cannot be added in the individual assessment solely because of that legal assumption.

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