PATEL K Y Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under section 256(1) of the Income -tax Act, 1961, made at the instance of the assessee, the Income -tax Appellate Tribunal, Bombay Bench 'E', Bombay, has referred the following question of law to this court for opinion : 'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the provisions of section 64(2) were applicable in the case of the assessee ?'

(2.) THE assessee is an individual deriving income from salary, property, dividends and shares from a partnership -firm. The assessment years are 1975 -76 and 1976 -77, the relevant previous years being the years ended on March 31, 1975, and March 31, 1976, respectively.

(3.) THE assessee appealed to the Appellate Assistant Commissioner. Before the Appellate Assistant Commissioner, the assessee contested the addition of the foreign dividends to his income on an altogether different ground. This time, the contention of the assessee was that the foreign shares which were formerly the individual property of the assessee were converted by him by a declaration dated March 28, 1970, into property of the joint family consisting of himself, his father and mother. As in the past, the Income -tax Officer added one -third of the income arising from the said shares in the individual income of the assessee in the assessment year 1975 -76 by applying the provisions of sub -section (2) of section 64 of the Income -tax Act, 1961 (for short 'the Act'), as applicable to the assessment for the said assessment year. However, in the assessment for the assessment year 1976 -77, in the light of the amendment made in sub -section (2) of section 64 of the Act with effect from April 1, 1976, the Income -tax Officer included the whole of the dividend income in the hands of the assessee. The new case pleaded by the assessee before the Appellate Assistant Commissioner was that sub -section (2) of section 64 of the Act did not apply at all to the facts of the present case. According to the assessee, sub -section (2) of section 64 is applicable only if the transfer of the property is made by the individual to a joint family of which he is the karta and not to transfers made to a joint family of which he is only a member. Recording to the assessee, section 64(2) at no time had any application to transfers made to a joint family of which the individual concerned was not the karta like a joint family consisting of the assessee, his father, mother and brothers. It may be mentioned that though the conversion of the property was made during the previous year relevant to the assessment year 1971 -72, the assessee had not raised any such contention in any of the earlier years. Even during the years under consideration, as stated earlier, this new plea was raised for the first time in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner considered the above contention of the assessee in the light of the provisions of section 64(2), as it stood before and after the amendment with effect from April 1, 1976. He, however, held that the conditions for application of section 64(2) were fully satisfied in the case of the assessee and hence upheld the order of the Income -tax Officer for the two years.