2005 (8) TMI 43 - HC - Income Tax

Court rules income from partitioned assets as HUF income post-marriage

Dr. Prakash B. Sultane Versus Commissioner of Income-Tax.

Dr. Prakash B. Sultane Versus Commissioner of Income-Tax. - [2006] 280 ITR 593, 198 CTR 529, 148 TAXMANN 353 Issues Involved1. Whether the income from assets received on partition should be assessed as individual income or Hindu undivided family (HUF) income after the assessee's marriage.Detailed AnalysisIssue 1: Assessment of Income from Partitioned Assets Post-MarriageBackground:The assessee, a doctor by profession, was initially assessed as an individual for both his professional income and income from assets received on partition from a larger Hindu undivided family (HUF). Upon marriage on January 22, 1980, the assessee contended that the income from the partitioned assets should be assessed as HUF income, consisting of himself and his wife. This claim was rejected by the Income-tax Officer (ITO) and the Appellate Assistant Commissioner (AAC), but the Tribunal allowed the appeal, setting aside the AAC's order.Arguments and References:- The assessee relied on the Allahabad High Court's judgment in Prem Kumar v. CIT [1980] 121 ITR 347, which held that the share of an unmarried coparcener retains its character and becomes HUF property upon marriage.- The ITO rejected the claim based on the Madhya Pradesh High Court's judgment in CIT v. Vishnukumar Bhaiya [1983] 142 ITR 357, which stated that the status of the assessee remains individual until a son is born.- The AAC disagreed with the Madhya Pradesh High Court's position, referring to the Supreme Court's decisions in C. Krishna Prasad [1974] 97 ITR 493 and Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, emphasizing that HUF property does not change character merely because the assessee is the sole surviving member.- The Tribunal, however, upheld the Madhya Pradesh High Court's view, stating that marriage does not change the property's character and that the wife does not have coparcenary rights.Tribunal's Findings:- The Tribunal cited the Supreme Court's observations in Surjit Lal Chhabda [1975] 101 ITR 776, emphasizing that the wife's rights are limited to maintenance and do not enlarge upon marriage.- The Tribunal concluded that the marriage did not change the property's character, which remained vested in the assessee as individual property.Contrary Judgments and Analysis:- The Gujarat High Court in CIT v. Parshottamdas K. Panchal [2002] 257 ITR 96 held that ancestral property received on partition retains its HUF character even if the family temporarily consists of a single male member.- The Supreme Court in Gowli Buddanna v. CIT [1966] 60 ITR 293 and N.V. Narendranath v. CWT [1969] 74 ITR 190 supported the view that HUF property does not lose its character due to temporary reduction in family members.- The Madras High Court in W.P.A.R. Rajagopalan v. CWT [2000] 241 ITR 344 and the Madhya Pradesh High Court in Balkrishna Goyal v. CWT [1996] 218 ITR 671 also supported the view that such property should be assessed as HUF property upon marriage.Supreme Court's Latest Decision:- The Tribunal's reliance on CWT v. Chander Sen [1986] 161 ITR 370 was deemed misplaced as the facts differed significantly. The Chander Sen case dealt with inheritance under the Hindu Succession Act, 1956, which did not apply to the present case.Conclusion:- The Tribunal erred by not recognizing the distinction between 'joint family' and 'coparcenary,' as highlighted in Gowli Buddanna v. CIT [1966] 60 ITR 293.- The property received by the assessee on partition retained its character as HUF property even after his marriage.- The Tribunal's conclusion that the property remained individual property post-marriage was incorrect.Final Judgment:- The High Court answered the question in the negative, ruling against the Revenue and in favor of the assessee, affirming that the income from the partitioned assets should be assessed as HUF income post-marriage.