TaxTMI 
TaxTMI 
1983 (1) TMI 105
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....laration to this effect was also filed before the income-tax authorities. Subsequently on 23-3-1978, the assessee, his wife and his unmarried daughter as settlors and in their capacity as members of a HUF settled an amount of Rs. 1,000 and certain shares held by the assessee individually on a trust for the benefit of the assessee, his wife and his unmarried daughter, i. e., themselves. For the assessment years 1972-73, 1973-74 and 1974-75, the ITO did not accept the claim of the assessee that the income from the above assets were to be assessed in the hands of a HUF, consisting of himself, his wife and daughter. A protective assessment was also made on the alleged HUF. The above assessments on the individual including in his income, the income from the properties allegedly thrown into the common hotchpotch, came up on appeal before the Tribunal on the question of status. For the assessment year 1972-73, the status claimed of HUF was not accepted by the Tribunal as well. Relying on the Supreme Court decision in the case of Surjit Lal Chhabda v. CIT [1975] 101 ITR 776, the Tribunal in IT Appeal Nos. 471 to 473 (Bom.) of 1976-77, dated 10-7-1978 held that the exercise of the assessee ....
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....ion for accumulation of the income for as long a period as 22 years. Even if the first act of throwing into common hotchpotch performed in 1971 was ineffective, the creation of the trust with a benefit going to the HUF was a legal fact of importance. The assessee as an individual has no right to the income of the trust nor can the wife or the minor child be regarded as the beneficiary of an indirect transfer for their benefit. The entire amount, therefore, was to be excluded from the assessment of the assessee. The decisions in Surjit Lal Chhabda's case, Ratilal Khushaldas Patel's case and Prem Kumar v. CIT [1980] 121 ITR 347 (All.), were cited in this connection. Even if the alleged blending was ineffective, there was a gift to the family which took away these assets and the income therefrom from the individual. 4. For the department, it is pointed out that both the gift and the alleged trust in the alternative, were illegal. If the fact of the blending of the properties is, as directed by the Tribunal, ignored, the assessee was the owner of the property. There was no HUF which could transfer this property to joint owners or a HUF for a matter of that. The settlor, according to....
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....visions hereinafter declared and contained concerning the same and whereas the trustees have at the request of the settlors agreed to act as the trustees of these presents as is testified by their joining in and executing these presents now this indenture, witnesseth and it is hereby agreed and declared as follows : (a) Upon trust, in the first instance to collect the dividends, interest, rents and other income of the trust fund (hereinafter for brevity sake called 'the income' of the trust fund) and from and out of the same in the first place pay all costs, charges and expenses of and incidental to the collection thereof and all outgoings in respect of the trust fund and any immovable property or properties for the time being subject to the trusts hereof as also all costs, charges and expenses of and incidental to the execution of the trusts and powers herein contained ; (b) subject to the provisions of sub-clause (a) of this clause the trustees shall till the date of distribution hereinafter mentioned pay, appropriate or apply the whole of the income of the trust fund to the Hindu undivided family of Vasant Jagjiwan Sheth for the maintenance, residence, education, medical a....
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.... Their Lordships of the Supreme Court referred to two classes of cases each of which required a different approach, They observed : "There are thus two classes of cases, each requiring a different approach. In cases falling within the rule in Gowli Buddanna's case, the question to ask is whether property which belonged to a subsisting undivided family ceases to have that character merely because the family is represented by a sole surviving coparcener who possesses rights which an owner of property may possess. For the matter of that, the same question has to be asked in cases where the family, for the time being, consists of widows of deceased coparceners as in Commissioner of Income-tax v. Rm. Ar. Ar. Veerappa Chettiar so long as the property which was originally of the joint Hindu family remains in the hands of the widows of the members of the family and is not divided amongst them. In cases failing within the rule in Kalyanji's case, the question to ask is whether property which did not belong to a subsisting undivided family has truly acquired the character of joint family property in the hands of the assessee. In this class of cases, the composition of the family is a matt....
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....ervations made by it in the case of Kalyanji Vithaldas v. CIT [1937] 5 ITR 90 regarding the view taken by the Bombay High Court in the case of CIT v. Gomedalli Lakshminarayan [1935] 3 ITR 367 were expressly disapproved by the Court in at least two cases, viz., Gowli Buddanna and N. V. Narendranath. The Supreme Court held, on a consideration of the cases, that a Hindu could form a joint Hindu family with his wife and minor daughter. For income-tax purposes his alleged throwing of self-acquired property into the above joint family hotchpotch was not accepted for the reasons that the property 'may be usefully described as the property of the family after it was thrown into the common stock, but it does not follow that in the eye of Hindu law it belongs to the family, as it would have, if the property were to devolve on the appellant as a sole surviving coparcener'. The property in dispute in Surjit Lal Chhabda's case was thus held to be assessable in the hands of the individual assessee only for the reason that the income therefrom still remained 'his income even after the property was thrown into the family hotchpotch'. 8. Surjit Lal Chhabda's case thus clearly enunciates that a j....
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....nmarried daughter, i. e., themselves, there was a clear case of the family, the legal owner of the property, divesting itself of its ownership in favour of the trust. The fact that such divesting was done under the signature of the assessee and his wife and himself representing the daughter or the other fact that they were themselves the beneficiaries under the trust does not alter the effectiveness in law of the transfer. If the assessee be regarded as the karta of the family, perhaps it could have been sufficient in law that he signed a transfer deed, transferring the property to the trust. The fact that the wife also signed as a settlor and the father joined it as a guardian of the minor, does not alter the legal position even a little. The fact, therefore, has to be accepted that after the trust was created, these assets stood transferred to the trust. 10. The question is whether section 64 would be applicable to the case and if so to what extent. In view of the foregoing, perhaps it cannot be contested that there was an indirect transfer of the property by the individual to the trust for the benefit of the named beneficiaries. Even this would not attract the provisions, in ....