Income Tax Appellate Tribunal - Mumbai
Bakul Jain vs Income-Tax Officer on 23 May, 1990
Equivalent citations: [1990]34ITD221(MUM)
ORDER
V. Dongzathang, Accountant Member
1. These appeals are directed against the orders of the A.A.C. for the assessment years 1983-84 and 1984-85.
2. The facts are that the assessee is an individual having income from the firm of Jain Brothers Corporation and other incomes like income from dividend and interest etc. The assessee got married on 6-2-1982. After the marriage, the assessee received various gifts amounting to Rs. 51,000 and the same was claimed to have been received by the assessee in his status as the karta of the H.U.F. comprising of himself and his wife. The amount was deposited and interest of Rs. 202 was received during the year. It was the claim of the assessee before the ITO that this income constituted the income of the HUF. For this proposition, reliance was placed on various decisions of the Courts, namely, Gowli Buddanna v. CIT [1966] 60 ITR 293 (SC), Vedathanni v. CIT [1933J 1 ITR 70 (Mad.) and N.V. Narendranath v. CWT [1969] 74 ITR 190 (SQ. According to the ITO, the decisions cited on behalf of the assessee were no more the correct law in view of the subsequent decision in the case of Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC). Holding that the assessee in this case cannot have a HUF, he treated the arrangement as coming within the meaning of tax planning as contemplated by the Supreme Court in the case of McDowell & Co. Ltd. v. CTO[1985] 154 ITR 148. He accordingly assessed the interest income of Rs. 202 in the hands of the assessee. Aggrieved by the said order, the assessee took up the matter in appeal before the A.A.C. and reiterated the same contentions as placed before the ITO. The learned A.A.C, however, upheld the order of the ITO.
3. The assessee is aggrieved and has come up in appeal before the Tribunal. Shri Shrinivasan, learned authorised representative appeared for the assessee and Shri K.K. Dhawan, learned Departmental Representative appeared for the Revenue. It is the claim of the learned representative of the assessee that the controversy in this regard is now settled by the decision of the Madras High Court (Full Bench) in the case of CIT v. M. Balasubramanian [1990] 182 ITR 117 wherein similar case it was held that the property gifted assumed the character of a joint family property. Distinguishing the decision of the Supreme Court in the case of Surjit Lal Chhabda [supra), it was held that when there are express provisions to the effect in the deed of gift or will that the donee would take the property for the benefit of the family, that is decisive. The donor or testator dealing with self-acquired property may, by evincing the appropriate intention, render to the property gifted the character of a joint family property or, as the case may be, a separate property in the hands of the donee vis-a-vis his male issue. Keeping in view this decision, it is submitted that the claim of the assessee is to be allowed and the gifted property cannot be included in the individual assessment of the assessee. On the other hand, Shri K.K. Dhawan, learned Departmental Representative supported the order of the learned A.A.C. According to him, a Hindu undivided family presupposes a jointness. The normal state of every Hindu family is joint and unless there is a HUF before the gift, it cannot assume the character of a HUF by impressing the gift to the husband and wife which is not Hindu undivided family in law. Since the case of the assessee is squarely covered by the decision of the Supreme Court in the case of Surjit Lal Chhabda (supra) relied upon by the ITO and the A.A.C., it is submitted that this is a pure and simple tax planning as contemplated by the Supreme Court in the case of McDowell & Co. Ltd. (supra). It is, therefore, submitted that no interference is called for in this regard.
4. The rival submissions are carefully considered in the light of the material placed on the record. The assessee in this case is an individual who got married on 16-2-1982. After the marriage, the assessee received various gifts amounting to Rs. 51,000. The genuineness of the gifts has not been doubted by the Revenue authorities. The intentions of the donors have been duly evidenced by the letters written to the assessee expressing the desire that this sum should be received by him for and on account of the HUF which has come into existence consisting to-day of himself and his wife and into which family would be added his future children. On these facts, the question for consideration is whether this gift property will assume the character of HUF property for the purpose of income-tax assessment. In this regard, the controversy is now set at rest by the decision of the Full Bench of the Madras High Court in the case of M. Balasubramanian (supra). In that case, the assessee's father gave him a cheque for Rs. 10,000 and cash of Rs. 100. Contemporaneously, he gave him a letter stating that the benefit of this sum should go to his wife and children when he got married and that he can enjoy it as a HUF. The gift was accepted by the assessee. The assessee was a bachelor at the time of the gift. Subsequently, he married and during the relevant assessment year, namely, 1972-73, he had a wife and a daughter. The Revenue wanted to treat the income from the sums gifted as individual income under the Income-tax Act and the sums and accretions thereto as individual properties under the W.T. Act. The assessee claimed that the properties and income therefrom were assessable as belonging to his HUF. The claim was accepted at the stage of the Appellate Tribunal. On a reference, it was held that the income from the gifted property arose to the HUF and could not be clubbed with the assessee's individual income. While arriving at this decision, the Full Bench of the Madras High Court overruled their earlier decision in the case of M. Balasubramanian (supra) distinguished the decision of the Supreme Court in the case of Surjit Lal Chhabda (supra). According to the Hon'ble High Court, the issue in such cases has to be decided by the primary rule of intention of the donor and in that view of the matter, such property gifted was to be assessed as intended. The Hon'ble High Court distinguished the case in Surjit Lal Chhabda (supra) on facts. That was a case where the assessee had a wife and unmarried daughter and he made a declaration that he had thrown the immovable property which was his self-acquisition into the joint family hotchpotch in order to impress that property with the character of joint family property and he further declared that he would be holding the property as the karta of the joint Hindu family consisting of himself, his wife and his unmarried daughter. Dealing with the facts of the case and expressing the view that until the birth of a son the personal law of the assessee governed, it was held that the income was chargeable to income-tax in the hands of the assessee as his individual income and not that of the family.
5. Since the present case of the assessee before me squarely falls within the ratio laid down by the Hon'ble Madras High Court in the case of M. Balasubramanian (supra), it is to be distinguished from the earlier Supreme Court decision for the same reasons and the primary rule of intention of the donor is to be applied. In that view of the matter, the gifted property cannot be assessed as the income of the individual. It has to be separately assessed as the income of the HUF as held by the Hon'ble Madras High Court. I hold accordingly and allow the claim of the assessee.
6. In the result, the appeals for both the years are allowed and the assessing officer is directed to exclude this income from the gifted property from the income of the individual assessee for both the years.