COMMISSIONER OF INCOME TAX Vs. KRISHNA MURTHY A

JUDGEMENT

(1.) IN these two applications filed by the Commissioner of INcome-tax under Section 256(2) of the INcome-tax Act, 1961, he seeks reference of the following two questions :

(2.) THE facts leading to the filing of the applications under Section 256(2) of the Act arc these: THE assessee is a partner in Messrs. Hyderabad Gas Company, Hyderabad, THE income derived by the assessee from the partnership firm as also the capital standing to his credit were being treated by the Income-tax Officer as belonging to him as "individual" and assessments were accordingly made. On December 31, 1969, the assessee abandoned his rights in the partnership firm both with regard to the capital put in by him as also the profits arising therefrom and threw the same into the common hotchpot of the Hindu undivided family which consisted of himself, his minor son, daughter and wife. On the basis of the declaration made by the assessee, the Income-tax Officer treated the income arising from the partnership firm as the income of the Hindu undivided family for the assessment years 1971-72 and 1972-73. He, therefore, did not include the income in the individual assessment of the assessee. THE Commissioner of Income-tax, in exercise of his powers under Section 263, issued a notice to the assessee to show cause why the income realised from the partnership firm should not be assessed in the hands of the assessee in the status of individual. After hearing the assessce, the Commissioner set aside the order of the Income-tax Officer and directed him to assess that income in the hands of the assessee in his individual capacity. THE Tribunal on appeal reversed the order of the Commissioner and restored that of the Income-tax Officer. THE Tribunal, in so reversing the order, relied upon the principles laid down by the Supreme Court in Charandas Haridas v. Commissioner of Income-tax [1960] 39 ITR 202, which was subsequently followed by it in Commissioner of Income-tax v. Bagyalakshmi and Co. [1965] 55 ITR 660.

(3.) THE above view was endorsed again by the Supreme Court in Commissioner of Income-tax v. Bagyalakshmi and Co. [1965] 55 ITR 660. It, therefore, follows that when once a member of the Hindu undivided family throws his interest or asset in the hotchpot, it gets blended by operation of the Hindu law and becomes an asset of the Hindu undivided family. THE Tribunal was, therefore, right in holding that the Commissioner of Income-tax was in error in treating the share income arising from the partnership firm as income of an individual assessable in the hands of the assessee.