COMMISSIONER OF INCOME TAX Vs. BALASUBRAMANIAN S

JUDGEMENT

(1.) IN pursuance of the direction given by the High Court under section 256(2) of the INcome-tax Act, 1961 (hereinafter referred to as "the Act"), the Tribunal referred the following questions for our opinion :

(2.) THE assessee was assessed to tax in the status of a Hindu undivided family consisting of himself, his wife and minor daughters in respect of the assets acquired from partial partition with his late father, T. S. Srinivasa Iyer. THE assessee got a got a son early in 1970. He effected a partial partition between himself and his minor son as per which each of the coparceners was allotted company shares of the value of Rs. 10,00,000. THE assessee's claim of partial partition was also accepted by the Income-tax Officer in his order passed under section 171(3) dated February 28, 1970. THE dividend income of Rs. 15,000 arising out of the shares allotted to Balasubramanian on partition was offered by him in a separate return of income in the status of a Hindu undivided family consisting of himself, his wife and minor daughters. THE Income-tax Officer, however, rejected the claim of the assessee regarding the smaller or the new Hindu undivided family on the ground that there cannot be more than one Hindu undivided family having the same person as the karta and, therefore, he held that the above income is assessable with that of the original Hindu undivided family. Thus, for the assessment year 1971-72, a sum of Rs. 15,000 was also added under the head "Other sources" being the dividend returned in the file of a new Hindu undivided family. THE Income-tax Officer assessed the dividend income in the hands of the assessee on a protective and precautionary basis without prejudice to the finding that this income should be really clubbed with that of the older Hindu undivided family. On appeal, the Appellate Assistant Commissioner held that after the partial partition the assessee continued to be a Hindu undivided family consisting of himself, his son and the other members of the family and, therefore, he has to be assessed in the same status in respect of the income arising out of the other assets which were not subjected to the partition. But with regard to the dividend income of Rs. 15,000 which arose from out of partial partitioned asset, viz., shares in the company, the Appellate Assistant Commissioner held that the ownership as well as the enjoyment of the assets and the income accrued therefrom absolutely vests with the Hindu undivided family consisting of Balasubramanian and his family excepting his minor son. THE Appellate Assistant Commissioner, therefore, held that in so far as the income of Rs. 15,000 is concerned, the assessee's claim that he should be assessed in the status of a smaller Hindu undivided family should be accepted. THE Appellate Assistant Commissioner accordingly deleted the addition made in the case of the original (bigger) Hindu undivided family. Aggrieved by the order of the Appellate Assistant Commissioner, the Department went on appeal before the Appellate Tribunal against the deletion of a sum of Rs. 15,000 from the income of the bigger Hindu undivided family and also against the observation of the Appellate Assistant Commissioner that the assessee can constitute a separate Hindu undivided family consisting of himself, his wife and minor daughters in respect of his income from dividends. THE deletion of the addition in the individual assessment was also contested in appeal. THE Tribunal disposed of both these appeals by a common order. THE Tribunal also took the same view as that of the Appellate Assistant Commissioner. Thus, the Tribunal confirmed the orders passed by the Appellate Assistant Commissioner.

(3.) ACCORDING to learned standing counsel for the Department, the said registered deed of partial partition had effected a division in the status of family, after the said date there was no joint family in existence and thereafter the property was sought to be held by the members of the family as co-tenants only. It remains to be seen that the members of the family under section 171 of the Act, in the course of the assessment proceedings for the assessment year 1970-71, made a claim for acceptance of the partial partition. ACCORDING to the order passed under section 171 of the Act evidence had been produced before the Income-tax Officer in support of the claim for partial partition. On a perusal of the evidence and after conducting enquiries, the Income-tax Officer recorded a finding under Section 171 of the Act accepting the partial partition as mentioned in the deed dated March 26, 1970. This order has become final.