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1983 Supreme(AP) 133
Andhra Pradesh High Court
Judges : A.SEETHARAM REDDY, M.JAGANADHA RAO
Prem Chand - Appellant
Versus
Commissioner of Income Tax, A.P., Hyderabad - Respondent
Decided On : 03-30-83
The status of a sole coparcener with his wife, who obtained property at a partition of the joint family property, is that of a HUF, and the income from the property allotted to him is to be assessed as HUF income, notwithstanding the fact that his wife has been given a share therein according to the Benaras School of Hindu law.
Headnote:
HINDU JOINT FAMILY - ASSESSMENT - SOLE COPARCENER WITH WIFE - PARTITION - SHARE TO WIFE - STATUS OF ASSESSEE - INCOME FROM PROPERTY ALLOTTED TO ASSESSEE - WHETHER ASSESSEE TO BE ASSESSED AS HUF OR INDIVIDUAL - RATES OF TAX APPLICABLE.
Fact of the Case:
The assessee, a sole coparcener with his wife, obtained property at a partition of the joint family property. The wife was also given a share in the partition. The assessee filed returns as an individual in respect of the income from the property allotted to him. The ITO assessed him as a HUF and applied the higher rate of tax as per Sub-para. II of Para A of Schedule I to the Finance Act, 1974. The assessee appealed to the AAC, who allowed the appeal and directed the ITO to apply the rates as per Sub-para. I of Para A of Sch. I to the Finance Act, 1974. The Department appealed to the Tribunal, which allowed the appeal and held that the assessee was a HUF and that the higher rate of tax was applicable. The assessee filed a reference to the High Court.
Finding of the Court:
The High Court held that the assessee had to be assessed as a HUF in respect of the income obtained from the property allotted to him in partition, notwithstanding the fact that his wife had been given a share therein according to the Benaras School of Hindu law. The Court also held that the partition at which the wife was given a share did not have the effect of wiping out her "sapinda" relationship. She, therefore, continued to be a member of the family of her husband notwithstanding the fact that under the Benaras School of Mitakshara law she was given a share.
Issues: 1. Whether the assessee had to be assessed as a HUF or as an individual? 2. Whether the partition at which the wife was given a share had the effect of wiping out her "sapinda" relationship?
Ratio Decidendi: 1. The Court held that the assessee had to be assessed as a HUF in respect of the income obtained from the property allotted to him in partition, notwithstanding the fact that his wife had been given a share therein according to the Benaras School of Hindu law. The Court relied on the rule laid down in Gowli Buddannas case [1966] 60 ITR 293 (SC), which held that where the property "was originally" owned by coparceners of a HUF and later devolved on a sole surviving coparcener who had female members in his family, the character of the property as HUF does not change in spite of the temporary reduction of the number of coparceners, and the sole surviving coparcener has to be assessed as a HUF. 2. The Court held that the partition at which the wife was given a share did not have the effect of wiping out her "sapinda" relationship. The Court relied on the definition of a Hindu joint family as a large body consisting of a group of persons who are united by the tie of sapindaship arising by birth, marriage or adoption. The Court held that the wife's "sapinda" relationship with her husband continued even after the partition, and therefore she continued to be a member of his family.
Final Decision: The Court answered the questions in favour of the Department and against the assessee. The assessee's appeal was dismissed.
( 1 ) THESE five R. Cs. raise a question of law relating to the assessment of a family governed by the Benaras school of Mitakshara Hindu law and can be disposed of together.
( 2 ) WE shall first advert to the facts in R. C. No. 62/78. Sri Sardarilals wife is Smt. Janaki Bai and they have a son. There was a registered partition, dated 27/10/1970, among them in which the joint family properties were divided and as the parties belong to the Benaras school of Mitakshara law, a share was given to Smt. Janaki Bai also, comprising of certain houses valued at Rs. 63,600 and she was taxed on the income therefrom. For the assessment year 1974-75, Sri. Sardarila filed a return as a HUF in respect of the property obtained by him at the partition, dated 27/10/1970. The ITO assessed his taxable income at Rs. 37,470 but chose to apply (a higher) rate of tax as per Sub-para. II of Para A of Schedule I to the Finance Act, 1974, as in his opinion there was at least one member of the HUF having an income exceeding the taxable limit, inasmuch as the petitioner did not fill in the particulars as per annex. I whether the family had at least one member whose total income exceeded the taxable limit.
( 3 ) THE petitioner filed an appeal the AAC who allowed the appeal on 16/08/1975, holding that there was a partition and the family consisted only of the petitioner and his wife, that his wife was not having any taxable income and, therefore, he directed the ITO to apply the rates as per Sub-para. I of para. A of Sch. I to the Finance Act, 1974.
( 4 ) THE Department preferred an appeal, I. T. A. No. 1449/hyd/75-76, before the Tribunal which allowed the appeal on 17/11/1976. Before the Tribunal, the petitioner raised a new question, namely, that the petitioner should have been assessed as an "individual" and not as a HUF and the Tribunal allowed the said question to be raised. The petitioner then contended that after the partition, dated 27/10/1970, among the petitioner, his son and wife, of the joint family properties, there was no Hindu joint family in the eye of law even though the petitioners wife might have been continuing to live with him, and even though the petitioners wife is taxed in respect of the income from the houses valued at Rs. 63,600 allotted to her share.
( 5 ) THE Tribunal, however, rejected the claim of the petitioner stating that the husband and wife continued to live together for purpose of coverture and consortium and that there continued to be a HUF consisting of the assessee and his wife, Smt. Janaki Bai, and that the petitioner cannot be assessed as an "individual". It held further that Sardarilal was the karta of the HUF and there was at least one member thereof whose total income exceeded Rs. 5,000, and that the ITO was right in adopting the higher rate of tax as per Sub-para. II of Para. A of Sch. I to the Finance Act, 1974. R. C. No. 62/78 is preferred at the instance of Sri Sardarilal.
( 6 ) R. C. No. 85/81 relates to the same assessee, Sardarilal, for the assessment year 1975-76, and the Tribunal followed its judgment in I. T. A. No. 1449/hyd/75-76, dated 17/11/1976, out of which R. C. No. 62/78 has arisen.
( 7 ) R. C. No. 3 R. C. No. 9/80 and R. C. No. 84/81 arise in the case of Sri Premchand for the assessment years 1974-75, 1975-76 and 1976-77 respectively, and in all these cases the Tribunal held against the contention of Sri Premchand and followed its decision in ITA No. 1449/hyd/75-76, relating to Sri Sardarilal. In R. C. No. 38/78 and R. C. No. 9/80, the Tribunal restored the orders of the ITO while in R. C. No. 84/81, the Tribunal affirmed the concurrent decision of the ITO and the AAC. The family composition in Sri Premchands case is himself, his wife, Smt. Susheelabai, and his two sons who divided the joint family property by registered partition, dated 26/10/1970, and Smt. Susheelabai was also given a share in the partition. Sri Premchand filed returns in the respective years in the respect o
