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1989 Supreme(All) 437
High Court of Allahabad
U.C.Srivastava & S.N.Sahai, JJ.
J.P. Verma
Vs.
Commissioner of Income-Tax
Income-tax Reference 4 and 5 of 1987
Decided On : Aug 22, 1989
Advocate Appeared:
K.B.Jindal
Ancestral property in the hands of a coparcener continues to be ancestral property qua his offspring and this position has not changed even after the enactment of Section 19(b) of the Hindu Succession Act, 1956.
Headnote:
INCOME TAX - Hindu Undivided Family - Investment in house property - Whether any amount can be said to have been invested out of Hindu undivided family funds - Whether any portion of the income from the house can be said to be the income of the Hindu undivided family liable to be excluded from the income of the applicant.
Fact of the Case:
The assessee claimed that out of the total investment in the construction of the house property, a sum of Rs. 69,020 represented the funds of the Hindu undivided family. The Income-tax Officer held that only Rs. 8,000 could be said to represent ancestral funds. The Appellate Assistant Commissioner held that the house property belonged to the assessee's wife and the income therefrom had to be assessed in her own hands. The Tribunal held that the assessee's wife did not have any independent source of income and the sum of Rs. 82,120 actually belonged to the assessee and it was invested by him in the name of his wife.
Finding of the Court:
The court held that the assessee's claim that the sum of Rs. 69,020 represented the funds of the Hindu undivided family was not fully established. However, the court held that the sum of Rs. 23,137 obtained by the assessee under a succession certificate was ancestral property in his hands qua his sons and its true character could not be extinguished by any act or omission on the part of the assessee.
Issues: 1. Whether, on the facts and circumstances of the case, out of the amount invested in the construction of the house, any amount can be said to have been invested out of the Hindu undivided family funds? 2. Whether, on the basis of the above investments, any portion of the income from the house can be said to be the income of the Hindu undivided family liable to be excluded from the income of the applicant?
Ratio Decidendi: The court held that the sum of Rs. 23,137 obtained by the assessee under a succession certificate was ancestral property in his hands qua his sons and its true character could not be extinguished by any act or omission on the part of the assessee. Therefore, so much of the investment made in the house property in question as is attributable to the said sum of Rs. 23,137 must be regarded as Hindu undivided family property and so much of the income from the said house as bears proportion to the above investment is liable to exemption from income-tax in the assessee's hands.
Final Decision: The court answered the questions referred accordingly.
S.N. Sahay, J.
1. THIS judgment governs both References Nos. 4 and 5 of 1987.
2. The following two questions have been referred under Section 256 of the Income-tax Act, 1961 :
"(1) Whether, on the facts and circumstances of the case, out of the amount invested in the construction of the house, any amount can be said to have been invested out of the Hindu undivided family funds ?
(2) Whether, on the basis of the above investments, any portion of the income from the house can be said to be the income of the Hindu undivided family liable to be excluded from the income of the applicant ?"
The assessee, Sri J. P. Varma, is an Assistant Engineer in the Under-Ground Water Division, Lucknow. He filed a return for the assessment year 1977-78 declaring a total income of Rs. 9,370. In part III of the return, he declared that his wife had constructed a house bearing No. 22, Chandralok, for about Rs. 1,10,000 out of loans, advances and savings received from her father and others. The assessee's wife, Smt. Kamlesh Kumari, also filed her individual return. Regarding the investment in the construction of the house property, the assessee relied upon the contention raised by his wife in her case that it included a loan of Rs. 82,120 taken from the assessee. According to the assessee, the sources for the alleged loan of Rs. 82,120 were as follows :
Rs.
(i) Encashment of National Savings Certificates by the assessee 31,420
(ii) National. Savings Certificates encashed by the assessee's wife. 22,120
(iii) National Savings Certificates encashed by Km. Suman Khare 15,480
(iv) Non-refundable advance from G. P. F. 10,000
(v) Sale of scooter. 3,100
82,120
3. The assessee claimed that the total of items Nos. 1, 2 and 3 above amounting to Rs. 69,020 represented the funds of the Hindu undivided family. His case is that he obtained a succession certificate for Rs. 9,137 in respect of the Post Office Savings Bank Account and F.D.R. for Rs. 14,000 standing in his father's name who died in April, 1961, and received a sum of Rs. 16,000 contributed in equal shares by his four brothers under a family settlement. This amount of Rs. 39,137 was invested from time to time in purchasing the National Savings Certificates mentioned above.
4. The Income-tax Officer held that out of the investments in the National Savings Certificates and a double-storeyed house property, a sum of Rs. 8,000 only could be said to represent ancestral funds which too had all along been treated as individual funds of the assessee and were not separately identifiable. The alleged loan given by the assessee was without normal consideration of interest. THErefore, the assessee was the real owner of the house property, No. 22, Chandralok. The Income-tax Officer added Rs. 5,710 as income from the property in question as computed in the assessment of the assessee's wife and the assessment was completed by the Income-tax Officer accordingly.
The Appellate Assistant Commissioner held that the house property belonged to the assessee's wife and the income therefrom had to be assessed in her own hands. Therefore, the addition of Rs. 5,710 was deleted by the Appellate Assistant Commissioner. However, the Department preferred an appeal to the Income-tax Appellate Tribunal. The assessee filed cross-objections. Both the appeal and the cross-objections were decided by the Tribunal by order dated July 21, 1983.
5. The Tribunal held that Smt. Kamlesh Kumari, wife of the assessee, did not have any independent source of income. The sum of Rs. 82,120 actually belonged to the assessee and it was invested by him in the name of his wife. It was not a loan advanced by the assessee to his wife. With regard to the contention of the assessee regarding investments made out of the Hindu undivided family funds, the Tribunal recorded the following finding :
"The assessee's contention that the amount of Rs. 69,020 (total of items Nos. 1 to 3 of the foregoing Table) represented the funds of his
