MULK RAJ Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, an individual, had deposited a sum of Rs. 20,000 in his individual account with M/s Sohan Mal Hakam Chand & Co. of Muzaffarnagar. With effect from 18th March, 1972, he impressed this amount with the character of HUF property. He became a partner in the aforesaid firm on 4th Sept., 1972. In the previous year relevant to the asst. year 1973 -74, he earned Rs. 1,000 as interest on the aforesaid amount for the period from 1st April, 1972 to 3rd Sept., 1972, and share income of Rs. 8,204 for the period from 4th Sept., 1972 to 31st March, 1973. In his assessment, the assessee claimed that these two amounts belonged to his HUF but the ITO added them in his income under S. 64(2) of the INCOME TAX ACT, 1961. The AAC confirmed that inclusion and when the matter came in second appeal before the Tribunal the same view was taken. Now, at the instance of the assessee, the Delhi Bench 'C' of the Tribunal has referred the following question of law for the opinion of this Court :

(2.) AFTER hearing counsel for the parties, we are of the opinion that the Revenue authorities as also the Tribunal have been right in including the aforesaid two amounts in the income of the assessee under S. 64(2) of the Act. The relevant part of that sub -section reads as under :

(3.) THIS sub -section supersedes the general law that where a coparcener throws his separate property into the common stock of the family and thereby converts it into joint family property, or where such property is subsequently partitioned among the family members including the coparcener's wife and minor children, there is no direct or indirect transfer by the coparcener to the wife or the minor children. The effect of this provision is that where a member has converted his separate property into joint family property on or after 1st Jan., 1970, the part of the income from the converted property proportionate to that member's interest in the joint family property is taxable as his income and not as income of the joint family. The words "in so far as it is attributable to the interest of the individual in the property of the family" occurring in cl. (b) of this sub -section were omitted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st of April, 1976. It would be seen that the provisions contained in S. 64(2) are very clear and admit of no doubt and the Tribunal was right in confirming the inclusion of interest and the share income in the income of the assessee. We, therefore, answer the question in the affirmative, against the assessee and in favour of the Department. There will, however, be no order as to costs.