COMMISSIONER OF INCOME TAX Vs. PARSHOTTAMDAS K PANCHAL

JUDGEMENT

(1.) At the instance of Commissioner of Income-tax, Gujarat-IV, Ahmedabad, the Income Tax Appellate Tribunal, Ahmedabad Bench 'A' has referred following question of law for the opinion of this Court under section 256(2) of the Income-tax Act, 1961, in respect of Assessment Year 1979-80 :

(2.) FACTS : The respondent - assessee is an individual. He was a member of an H.U.F. known as 'Kantilal Karshandas' which was a partner in the firm of M/s Karshandas Bechardas & Sons through its Karta. A partial partition had taken place in the family in the year relevant to the Assessment Year 1970-71 by which the amount standing in the name of the HUF in the books of M/s. Karshandas Bechardas & Sons was partitioned amongst the members of the family. At the time of the partition, the assessee was a minor and, therefore, his share of income from the said firm was included in the hands of his father as per the provisions of section 64 of the Income-tax Act, 1961 ("the Act" for short). After he attained the majority, his share of income from the said firm was assessed in the capacity of "individual". In the previous year, relevant to Assessment Year 1979-80, the assessee got married. In his returns of income filed in the status of 'individual', the assessee did not show his share of profits from the said firm, as he took-up a stand that since he had received his share on the partition of the family and since after his marriage, his smaller HUF came into being, share of profit in the said firm belonged to his smaller HUF and not to him in his individual capacity. The Income-tax Officer, however, took the view that since the assessee was minor at the time of partition, the partition was not valid in law. For this purpose, the I.T.O. relied on the order of the Tribunal in the case of Apoorva Shantilal, which was confirmed by the Gujarat High Court in Apoorva Shantilal v. CIT, (1982) 135 ITR 158. In view of the above referred to conclusion, the I.T.O. clubbed the share of profit from the firm of M/s. Karshandas Bechardas & Sons in the total income of the assessee in his individual capacity.

(3.) In appeal before A.A.C., the assessee pointed out that the decision of the Gujarat High Court was reversed by the Supreme Court in Apoorva Shantilal v. Commissioner of Income-tax, Gujarat-I, (1983) 148 ITR 558 by holding that the partition effected by the bigger HUF was valid and submitted that his share in the income from the said firm should be treated as belonging to his smaller HUF. The AAC accepted the assessee's contention that the partition effected by the bigger HUF was the valid partition. However, since the assessee's smaller HUF consisted of husband and wife only, the AAC held that till a son is born in the smaller HUF, the share of income from the said firm belonged to the assessee in his individual capacity. The assessee thereupon approached the Tribunal by filing an appeal. Relying on the order of the Tribunal in the case of Atulkumar Ramanlal , ITA No.178/Ahd/84, decided on September 22, 1984,in which the Tribunal had an occasion to consider identical facts and circumstances, the Tribunal accepted the submission made on behalf of the assessee that his share of income from the said firm was not assessable in his individual assessment. The Tribunal directed the I.T.O. to modify the assessment made accordingly. The Commissioner of Income-tax, Gujarat-IV, Ahmedabad claimed reference from the Tribunal on the point of law which is accepted and that is how the present reference is placed before us for our opinion.