KISHANLAL MOOLCHAND Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion :

(2.) THE material facts giving rise to this reference, briefly, are as follows:

(3.) THE answer to the question referred to this court depends upon the answer to the question as to whether the property, of which the trust was created, was or was not the individual property of the assessee. In N.V. Narendranath v. CWT [1969] 74 ITR 190, the Supreme Court held that when a coparcener having a wife and minor daughters and no son received his share of the joint family property on partition, such property in the hands of the coparcener belonged to the Hindu undivided family of himself, his wife and minor daughters and cannot be assessed as his individual property. Following that decision, a Full Bench of this court held, in CIT v. Krishna Kumar [1983] 143 ITR 462, that when an assessee received property on partition of a bigger Hindu undivided family, although that assessee had no son and his wife had no interest in the property of the family, yet for the purposes of the status, the assessee with his wife constituted a Hindu undivided family. THE decisions in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC) and CIT v. Vishnukumar Bhaiya [1983] 142 ITR 357 (MP) are distinguishable on facts. If at the time of partition, a coparcener who receives a share is not married, different considerations will apply. In view of the decision of the Supreme Court in N.V. Narendranath v. CWT [1969] 74 ITR 190 (SC), it must be held that the property received by the assessee in the partition was the property of the Hindu undivided family consisting of the assessee, his wife and his minor daughter. THE Tribunal held that the intention of the assessee at the time of creation of a trust was to treat that property which he had received in the partition as his individual property and that is how he had treated it. But the fact that the assessee thought that the property which he received in the partition was his individual property and treated it as his individual property cannot convert the property of the Hindu undivided family consisting of himself, his wife and his minor daughter into individual property of the assessee. THE property received by the assessee in partition belonged to the Hindu undivided family of the assessee, his wife and his minor daughter and the income of that property could not be taxed in the hands of the assessee, assessed in the status of an individual. In our opinion, therefore, the Tribunal was not justified in holding that the income from the private trust in question was assessable in the hands of the assessee as the income of the assessee.