LAWS(KAR)-1988-8-22

GOPAL RAMANARAYAN Vs. COMMISSIONER OF INCOME TAX

Decided On August 12, 1988
GOPAL RAMANARAYAN Appellant
V/S
COMMISSIONER OF INCOME-TAX Respondents

JUDGEMENT

(1.) The assessee in this case has by a declaration dated 5th of January 1971, treated his property that is, "investment and partnership interest to the extent of 31 paise in a Rupee in the firm of "RAMCO SWADESHIS, COIMBATORE" as the property of the Hindu Undivided Family (hereinafter referred to as HUF) consisting of himself, his wife, his three sons and one daughter. On 10th January 1973, a partial partition was effected which was reduced into writing by a memorandum. In the said partial partition, it was provided that "general journal" entries be made in the books of the HUF to the effect that Rs. 50,000/- be allotted to each of the 3 sons and Rs. 25,000/- be allotted to the daughter, while Rs. 1 lakh be allotted to the smaller HUF of the assessee and his wife. Jawhar, one of the sons of the assessee attained majority on 30.1.1973. However, in spite of the declaration made on 5.1.1971 and the partial partition made on 10.1.1973 the balance in the name of the assessee remained unchanged in the books of the firm.

(2.) We are concerned in this case with the assessment for the year 1974-75. In that year, the assessee claimed that to the extent of a sum of Rs. 2,75,000/-, there was a partial partition in the HUF and requested for an order under Section 171 of the Income Tax Act, 1961 (hereinafter called the Act). The Income Tax Officer rejected this claim. He held that the assessee having thrown his interest in the firm into common hotch-pot of the HUF as indicated above, Section 64 of the Act was attracted and assessed such income in his hands.

(3.) On appeal, the Assistant Commissioner upheld the claim of the assessee of partial partition and directed the Income Tax Officer to pass a separate order recognising such partition. However, the other contentions raised by him were rejected, particularly, those based on the provisions of Section 64(1) and 64 (2) of the Act. He preferred further appeal to the Tribunal. Since the contentions were common in the assessee's appeal for the years 1973-74, 1974-75 and 1975-76, the same were consolidated and decided together by the Tribunal by an order dated 23-2-1979. The Department also filed an appeal against the order for the year 1974-75 and 1975-76 challenging the acceptance of the partial partition. These appeals were also considered together with the consolidated cases and the said appeals of both the assessee and the Department were dismissed. While for the assessment year 1973-74 a return of income of HUF was filed showing the previous year as ending on 31-3-1973, the I.T.O made a protective assessment in respect of HUF, but included the entire income for the said HUF, in the hands of the assessee as an individual. For the assessment year 1974-75, the HUF filed a return of income showing the previous year as ending on 9-1-1974. Again the I.T.O. made a protective assessment and brought the entire income of the HUF in the hands of the assessee as an individual. For both these years, the only income shown by the HUF is the share income from M/s. Ramco Swadeshis and interest income from the same. In respect of all the questions that arise for consideration in this case, the Tribunal has held against the assessee. Hence the assessee sought for reference of the several questions, but the Tribunal has referred to us the following questions for our opinion : 1. Whether on the facts and in the circumstances of the case, any part of the share income including interest from the firm of M/s. Ramco Swadeshis was includible in the hands of the assessee? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that interest paid to the members of the Hindu undivided family should not be deducted to ascertain the share income from the firm of M/s Ramco Swadeshis for the purpose of applying provisions of Section 64(2) read with Section 64 (1) 3. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the income from the converted property for the purpose of inclusion under Section 64(1) in the hands of the assessee should be determined without taking into account the provision to be made under Hindu Law for the maintenance and marriage of the unmarried daughter? 4). Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the share of income accruing to the minor Hindu Undivided Family consisting of the assessee and his wife was includible in the hands of the assessee under Section 64(1) read with Section 64(2)? 5). Whether on the facts and in the circumstances of the case, the Tribunal was justified in rejecting the claim for deduction of interest of Rs.14,056/-? 6). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of Section 64 are applicable also in relation to accretions to the converted property subsequent to the date of conversion of such property?"