COMMISSIONER OF INCOME TAX Vs. MAHARI AND SONS

JUDGEMENT

(1.) BY this reference under Section 256(1) of the Income-tax Act, 1961, made at the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal, Gauhati Bench, Guwahati, has referred the following question of law to this court for opinion :

(2.) THE assessee is a Khasi family. THE relevant assessment year is 1980-81. THE income of the assessee during the relevant previous year was Rs. 1,02,230, i.e., far in excess of the taxable limit. THE assessee did not submit any return of income voluntarily under Section 139(1) of the Act. It did not do so even in compliance with a notice under Section 139(2) of the Act. THE assessee, however, appeared before the Income-tax Officer, through its authorised representative, in response to a notice under Section 142(1) of the Act for production of books of account and documents and submitted that the assessee family was not liable to be taxed under the Act as its total income was exempt by virtue of Section 10(26) of the Act. THE claim of the assessee was rejected by the Income-tax Officer on the ground that the exemption was available only to the individual members of the Scheduled Tribes and not to the family comprising such members. THE Income-tax Officer treated the assessee family as a "body of individuals" and assessed it under Section 144 of the Act on a total income of Rs. 1,02,030. THE assessee preferred an appeal before the Commissioner of Income-tax (Appeals). THE Commissioner of Income-tax (Appeals) upheld the order of the Income-tax Officer so far as it related to the assessee being treated as a body of individuals, but reversed the same so far as it related to rejection of the claim of the assessee for exemption under Section 10(26) of the Act and held that the income of the assessee family was exempt from income-tax under Section 10(26) of the Act. THE order of the Commissioner of Income-tax (Appeals) was upheld by the Tribunal. Aggrieved by the order of the Tribunal, the Commissioner of Income-tax filed an application before the Tribunal under Section 256(1) of the Act and the Tribunal, on being satisfied that a question of law did arise out of its order, has referred the aforesaid question of law to us for opinion.

(3.) IN the instant case, there is no controversy about the existence of the last two conditions. There is also no controversy that Khasis are members of a Scheduled Tribe as defined in Clause (25) of article 366 of the Constitution. It is also not in dispute that had the income in question in the instant case accrued to a single member of the Khasi Tribe, it would have been exempt under Section 10(26) of the Act. The only controversy is whether the income in the instant case having accrued not to an individual Khasi but to a Khasi family, whether this exemption will be available. IN other words, whether the benefit of exemption available to a member of Khasi Tribe will be available even if the income is earned by him not as an individual but as a group of individuals comprising the members of his family. There is no dispute that all the members of the family are Khasis.