CEPT Vs. LALCHAND HIRACHAND

JUDGEMENT

(1.) THE assessee is an HUF, consisting of a father, a major son and two minor son, as its coparceners. Prior to the accounting year in question, a partial partition took place in this joint Hindu family, whereby the shares of joint stock companies held by the family came to be divided amongst the members of the family entitled to property on partition. This partial partition was recognised by the IT authorities and the father and the sons in their individual capacity were assessed to tax in respect of the income derived by them from the assets obtained by them at the partial partition. Out of the said incomes which the sons had received from the said assets, they had incurred expenditure on themselves in the amounts of Rs. 11,169, Rs. 7,582 and Rs. 17,427, respectively. In the assessment for expenditure -tax of the HUF, in the asst. year 1958 -59, for which the relevant account year was the year ending 31st March, 1958, the ETO included in the taxable expenditure of the HUF the above mentioned sums of expenditure incurred by the three sons out of the income of the assets obtained by them on partial partition. According to the ETO, these amounts were liable to be included in the taxable expenditure of the HUF under S. 4(ii) of the ET Act, as it stood at the material time, because in his view the sources out of which the expenditures were incurred by the sons were the sources which were made or created by the HUF within the meaning of S. 4(ii) of the Act. The view of the ETO was upheld by the AAC in appeal. In the second appeal, which the assessee preferred to the Tribunal, the said Tribunal disagreed with the view taken by the Departmental authorities and held that the said amounts were not from sources made or created by the HUF and were, therefore, not liable to be included under S. 4(ii). It accordingly allowed the appeal and directed the deletion of the said items from the taxable expenditure of the assessee. On an application made it by the Department under S. 25(1) of the ET Act, 1957, the Tribunal has drawn up a statement and referred to this Court the following question as arising out of its order:

(2.) IN our opinion, the conclusion of the Tribunal that these items were not liable to inclusion is correct and the question, therefore, must be answered in the negative. The provision under which the amounts were sought to be included by the Department is as follows :

(3.) IN the result, therefore, we answer the question which is referred to us in the negative. The Department will pay the costs of the assessee.