COMMISSIONER OF INCOME TAX Vs. HARIVADAN TRIBHOVANDAS

JUDGEMENT

(1.) IN this reference made at the instance of the revenue, the following question has been referred to us by the Income -tax Appellate tribunal :

(2.) THE facts giving rise to this reference may be shortly stated. The assessee is an individual and the relevant assessment year is 1962 -63. Prior to September 11, 1958, or even a short time prior thereto, the assessee was a member of a joint and undivided Hindu family consisting of his father, two wives of his father and two brothers of the assessee and the assessee himself. This Hindu undivided family owned considerable movable and immovable properties. By a partition deed dated September 11, 1958, there was a partition amongst the members of the Hindu undivided family and there was a complete description and the properties were also divided by metes and bounds. At the time of this partition of 1958, property bearing survey No. 170 -1 was allotted jointly to the assessee and his brothers. The partition deed showed that each of the three brothers was given one -third undivided share of the said property covered by survey No. 170 -1 of Navrangpura village within the limits of Ahmedabad City. On the basis of the said partition deed the Hindu undivided family applied under section 25A of the Indian Income -tax Act, 1922, and on that application a finding was recorded by the competent authority that there was a complete partition by metes and bounds. On March 24, 1961, the property bearing survey No. 170 -1 was divided amongst the assessee and his two brothers. According to this deed of March 24, 1961, the two other brothers of the assessee were given portions of land survey No. 170 -1 and the assessee was given a sum of Rs. 36,630 in lieu of land from that survey number. It may be mentioned at this stage that at the time of the partition of 1958 between the assessee and other members of the Hindu undivided family, one -third portion of the land which was given to the assessee was mentioned as being worth Rs. 18,400. Thus, on the basis of the document of March 24, 1961, in the assessment proceedings of the assessee for the assessment year 1962 -63, the Income -tax Officer held that the amount of Rs. 18,230 represented capital gains and must be assessed as such. Against the decision of the Income -tax Officer, the assessee appealed and the Appellate Assistant Commissioner came to the conclusion that the assessee's case was governed by section 47(i) of the 1961 Act, because, according to the Appellate Assistant Commissioner, there was a distribution of the capital asset on a partition of the Hindu undivided family. The Appellate Assistant Commissioner came to the conclusion that there was a partition of the Hindu undivided family property on March 24, 1961. He, therefore, held that the amount of Rs. 18,230 could not be treated as capital gains. The revenue appealed to the Income -tax Appellate Tribunal and before the Tribunal the contention of the revenue was that the assessee's case was not covered by section 47(i). On examination of the provision of section 47 of the Income -tax Act, 1961, the Tribunal held that the subsequent division amongst the three brothers under the deed of March 24, 1961, was not governed by the provisions of section 47(i). The Tribunal, however, accepted the alternative contention of the assessee that his case would be covered by section 47(ii) as the Tribunal came to the conclusion that at the time of divided of land by the deed of March 24, 1961, there was a distribution of capital assets on dissolution of a body of individuals, namely, the assessee and his two brothers, and the Tribunal held that the three brothers constituted a body of individuals since they were joint owners of the property after the earlier partition. The Tribunal also held that the property continued to be held undivided in their hands and they constituted themselves as a body of individuals. Since the body of individuals was dissolved and as a consequence of that dissolution the property held by members of that body jointly was divided amongst them, there was a distribution of capital assets of that body of individuals amongst its members and hence the case of the assessee fell squarely within the exemption set out in section 47(ii). The Tribunal did not deal with the other contentions urged on behalf of the assessee in the view that the Tribunal took regarding the applicability of section 47(ii) to the case of the assessee. The Tribunal, in view of this conclusion, upheld the order of the Appellate Assistant Commissioner though the reasons which appealed to the Tribunal were different from the reasons which appealed to the Appellate Assistant Commissioner. Thereafter, at the instance of the revenue, the question which we have set out at the commencement of this judgment has been referred to us for our opinion.

(3.) IT is obvious on the facts of this particular case that when the three brothers divided their jointly held property, namely, survey No. 170 -1, they were not members of a Hindu undivided family but were joint owners of this property in which each one had a one -third undivided share and they were holding this property as tenants -in -common. The Tribunal was, therefore, right when it came to the conclusion that the assessee's case was not covered by section 47(i).