COMMISSIONER OF INCOME TAX Vs. PALACE FUND INDIVIDUAL

JUDGEMENT

(1.) AT the instance of the Commissioner of Income-tax, Cochin, the Income-tax Appellate Tribunal referred the following two questions which are identical for all the assessment years and arising out of the common order of the Appellate Tribunal dated July 20, 1981, for the assessment years 1967-68 to 1971-72 :

(2.) THE assessee, the Palace Fund, was originally assessed in the status of a Hindu undivided family for the years 1964-65 to 1973-74. THE notional income from the buildings occupied by the members of the Royal family was assessed by the Income-tax Officer in the hands of the Palace Fund-Hindu undivided family. In the second appeal before the Tribunal, the Income-tax Appellate Tribunal, in I. T. A. Nos. 263 to 272/(Cochin) of 1974-75, by order dated November 25, 1975, held that the property did not belong to the Palace Fund and that the income from the property had to be excluded from assessment. THE Income-tax Officer, thereafter, as a precautionary measure, assessed the notional income from the property in the hands of the Palace Fund in the status of an individual for the assessment years 1967-68 to 1971-72. In I. T. R. Nos. 172 to 176 of 1982, we are concerned with the assessment on the Palace Fund in the status of an individual as against a Hindu undivided family. THE assessee went in appeal and the Appellate Assistant Commissioner accepted the contention of the assessee that the property occupied by the members of the Royal family did not belong to the Palace Fund, and, therefore, no notional income from this property can be assessed in the hands of the Palace Fund as individual. THE Appellate Assistant Commissioner followed the earlier order of the Tribunal bated November 25, 1975, aforementioned and held that the properties reserved for the members of the royal family did not belong to the Palace Fund. It was also held that the members of the Royal family have only a permissive right of use and occupation and, therefore, income from those properties has to be excluded from the assessment for the years in question as well. THE Appellate Assistant Commissioner held that the question of assessing the income from the properties reserved for members of the ruling family in the hands of the assessee either in the status of an individual or in any other status does not arise at all In that view of the matter, the Appellate Assistant Commissioner allowed the appeals. Aggrieved by the order of the Appellate Assistant Commissioner, the Revenue filed appeals before the Income-tax Appellate Tribunal. It was contended before the Tribunal by the Revenue that, in the absence of a definite finding by the Tribunal in the earlier order, the assessment in the status of an individual was in order. THE Tribunal found that the income sought to be assessed in the hands of the assessee is the notional income from the property reserved for the members of the Royal family for their use at the time of the integration of the Princely State of Cochin with Travancore. In the earlier order of the Tribunal dated November 25, 1975, when the assessee was assessed in respect of the same income as Hindu undivided family, the Tribunal held that the income sought to be assessed is the notional income from the properties reserved for the members of the Royal family for their use at the time of the integration of the Princely State of Cochin with Travancore. THEse properties reserved for the members of the Royal family are for the use of the family as a whole and cannot be alienated or leased out. Further, when any of them is not required for the use of the members of the Royal family, it will automatically revert to the State. It was because of these special features that the Tribunal, on an earlier occasion, held that the properties do not belong to the Palace Fund and the members of the family had only a right of permissive use and occupation. In view of that, the Tribunal once again found that the income from the properties had to be excluded from assessment in the hands of the Palace Fund. THE Tribunal found that the issue raised by the Revenue is covered by the earlier order of the Tribunal in I. T. A. Nos. 263 to 272/(Cochin) of 1974-75 dated November 25, 1975. It made no difference as to whether the status assigned to the assessee is that of an individual or that of a Hindu undivided family ; since whatever be the status, an individual or a Hindu undivided family or any other status, the income in respect of the property must first accrue to "the assessee" for it to be assessed to income-tax in the hands of "the assessee".

(3.) WHETHER, on the facts and in the circumstances of the case, the finding of the Income-tax Appellate Tribunal that the accessions, alterations, improvements and extensions and also the independent cottage type houses are not owned by the assessee and that, therefore, the income therefrom is not assessable to income-tax under Section 22 of the Income-tax Act, 1961, is unreasonable and wrong in law, especially when the Tribunal has found that these are investments and assets of the assessee ?"