Income Tax Appellate Tribunal - Ahmedabad
Jagdish H. Chokshi vs Income Tax Officer. on 16 February, 1993
Equivalent citations: (1993)47TTJ(AHD)263
ORDER
R. N. SINGHAL, A. M. :
These two appeals by the assessee involve common questions and they were heard together. Hence for the sake of facility they are disposed of by a consolidated order.
2. At the time of hearing, the learned Chartered Accountant for the assessee at the very outset pointed out that on the merits of the issue involved Tribunals decision dt. 19th Jan., 1989 in ITA Nos. 2248 to 2252 and 2259/Ahd/1986 for the immediately preceding years is against the assessee. He, however, pleaded that in view of a subsequently delivered decision of the Honble Madras High Court, the Tribunal be pleased to take a view different from the view taken in the earlier years. He hastened to add that, of course, even in the earlier years the Tribunal was pleased to grant reference under S. 256(1) vide their order dt. 13th Sept., 1990 in R. A. Nos. 260 to 265/Ahd/1989 and 884/Ahd/1990.
3. The learned Departmental Representative objected to the propositions canvassed on behalf of the assessee and submitted that when in assessees own case a Tribunal decision was available which considered all aspects of the matter in detail ordinarily that should be followed in subsequent years also.
4. From both the sides very detailed arguments were put forth on both the aspects of the matter viz. merits of the points involved independent of the view taken in the Tribunals decision in earlier years and also on the aspect of the desirability of the Tribunals order being followed. Ordinarily it is the second aspect which should be first dealt with but in this particular case for the facility of exposition it would be better to deal with the first aspect viz. the merits de hors the Tribunals decision in earlier years. This is so because after appreciating the facts and the inferences to be narrated on the aspect of merits it would be easier to appreciate the second aspect of the desirability of departure from the earlier order of the Tribunal. Obviously, we have decided to depart from the view taken by the Tribunal in earlier years. The reasons for the same follow hereinafter.
5. The facts lie in a narrow compass and they are in para 2 of the Tribunals order dt. 19th Jan., 1989 in the following terms :
"2.......... The assessees father made two gifts to the HUF of the assessee consisting of the assessee, his wife and daughter. The gifted amount was invested as capital by the assessee in a certain firm and the question is regarding the assessment of the income from the firm i.e., whether it is to be taxed in the hands of the assessee individual or in the HUF."
So, the Tribunal proceeded on the footing that assessees father gave gift of certain sums to the HUF of the assessee consisting of the assessee, his wife and daughter obviously no son. The assessee claimed that the share income was taxable in the hands of the HUF comprising of himself, his wife and his daughter but the Tribunal held otherwise. The reasoning is contained in para 9 of the Tribunals order wherein it is first noted that the gifts were made by the assessees father to the HUF consisting of the assessee, his wife and daughter but then it is observed that similar was the position in the Supreme Court decision in the case of Surjit Lal Chhabda vs. CIT (1975) 101 ITR 776 (SC). It further took note of the Punjab & Haryana High Court decision in the case of CIT vs. Ghansham Dass Mukim (1979) 118 ITR 930 (P&H) which was in favour of the assessee but proceeded to explain why that decision should not be followed by observing that in that decision the Honble Punjab & Haryana High Court had not specifically dealt with the point decided in the case of Surjitlal Chhabda (supra) by the apex Court. The point involved is specified at the bottom of page 8 in para 9 of the Tribunals order to be that although the property may be transferred to the family so long as the assessee has no son it has to be assessed in the hands of the individual. Then, towards the bottom of page 9 the Tribunal held that since the assessees case is fully covered by the decision of the apex Court in Surjit Lal Chhabda (supra) it is unnecessary to consider other decisions cited by the C. A. for the assessee.
6. Now, on merits, the learned C. A. has very heavily relied on the Full Bench decision of the Madras High Court in the case of CIT vs. M. Balasubramanian reported in (1990) 182 ITR 117 (Mad) (FB) whereby the earlier Division Bench decision of the same High Court for the same assessee CIT vs. M. Bala Subramaniam (1981) 132 ITR 529 (Mad) stood overruled. The learned C. A. submitted that now on merits the position was almost settled because according to him on this aspect there was no decision of any High Court to the contrary available on this date. He submitted that when the gift amount is received with specific stipulations that the same would be for the HUF of the assessee (comprising of himself, his wife and daughter(s) - with no son) the gift should be treated as made to the HUF. He submitted that in the case of Surjitlal Chhabda (supra) decided by the apex Court it was the property of that very assessee whose character was sought to be changed while in the assessees case the property itself was coming from a third person viz. assessees father - with specific stipulations of being treated for the HUF.
7. The learned Departmental Representative on the merits of the legal point did not have much to say. On facts, he pointed out that the Department was questioning the genuineness of the HUF itself coming into being and further that the stipulation of gifts being meant for HUF was perhaps contained in the gift-tax returns filed and not at the time of making of gifts themselves. On these factual aspects, we find there is no substance in the point, raised by the learned Departmental Representative. On the aspect of HUF not being genuine there is nothing beyond observation to such effect in the assessment order while the learned C. A. is right in mentioning that the appellate orders have proceeded on the footing that the HUFs were genuine. At any rate an HUF is a creature of a personal law and comes into being on a Hindu coparcener getting married. It is the character of property which has to be determined thereafter. To be specific it has to be seen which of the properties should be treated as owned by the HUF. So, inspite of the assessee being a married person and having daughter(s) it is no gainsaying that the genuineness of HUF itself coming into being was in doubt. Really the character of respective properties of assets has to be seen and that we are going to examine. The second objection of the specific stipulation of gifts being made only at the time of filing gift-tax returns is not supported by facts because the declarations are made at the time of gift or if the gifts are in instalments at the time of last gift. It may also be noted that the time gap between the instalments of gift is not much. It is hardly a few days and the last gift is of a much larger sum i.e., first gift is on 9th Dec., 1974 of Rs. 500 and the second is on 21st Dec., 1974 of Rs. 8,000 and the declaration for the aforesaid stipulations is dt. 21st Dec., 1974 itself.
On the legal aspect of the question, we now have the following four decisions which are in favour of the assessee :
1. CIT vs. M. Balsubramanian (1990) 182 ITR 117 (Mad) (FB)
2. Satyendrakumar vs. CIT (1983) 140 ITR 840 (Mad)
3. CIT vs. Radhambal Ammal (1985) 153 ITR 440 (Mad)
4. CIT vs. Ghansham Dass Mukim (1979) 118 ITR 930 (P&H) We need mention that in the decision cited at (1) above, the Full Bench of the Honble Madras High Court overruled its earlier decision in the case of that very assessee reported in (1981) 132 ITR 529 (Mad) (supra) and also noted the existence of decision cited at Sr. Nos. 2 and 3 at page 123 of the reports [182 ITR]. The decision cited at No. 4 was cited on behalf of the assessee and considered in the Tribunals decision dt. 19th Jan., 1989 but it was not followed for the reasons to which we shall come a little later. No contrary decision of any High Court has been brought to our notice though on the date of the Tribunals original decision dt. 19th Jan., 1989 the since overruled decision of the Honble Madras High Court in (1981) 132 ITR 529 (Mad) (supra) was available though it was neither cited nor considered in the Tribunals decision dt. 19th Jan., 1989.
9. This aspect apart, even if we go to the basic point of the effect of a donors intentions in such matters the Honble Supreme Court decision in C. N. Arunachala Mudaliar vs. C. A. Muruganantha Mudaliar (1954) SCR 243 held and holds the sway. Extracts from that decision appear in the original decision of the Honble Madras High Court starting from bottom of page 534 of the reports [132 ITR] and they are concised beautifully in the Full Bench decision of the Honble Madras High Court on page 124 of the reports (182 ITR) in the following terms :
"That a donor or a testator dealing with self-acquired property may, by evincing the appropriate intention, render the property gifted to assume the character of joint family property or, as the case may be, separate property in the hands of the donee vis-a-vis his male issue is now a settled proposition in view of the decision of the Supreme Court decision in C. N. Arunachala Mudaliar vs. C. A. Murugantha Mudaliar AIR 1953 SC 495. The primary rule deducible from the above pronouncement of the Supreme Court is one of intention and that could be applied even to a case of an HUF under the statutes concerned. If there are express provisions to the effect in the deed of gift or will that the son would take the property for the benefit of the family, that is decisive."
On this aspect, the abovementioned pronouncement of the apex Court is clearly in favour of the assessee.
10. While still on this aspect, we should note that the original decision of the Honble Madras High Court went against the assessee inspite of the extracts from the abovementioned Supreme Court decision having been incorporated in that decision because of the peculiar facts of that case noted on page 539 of the reports (132 ITR) to the effect that the assessee in that case was not even married when the property was sought to be given to his HUF. Presumably, on account of this distinction of factual background the learned Departmental Representative might have not relied on this decision of the Madras High Court when the Tribunals decision dt. 19th Jan., 1989 was rendered. Be that as it may, there was one High Court decision in favour of the Department though on facts worse from the angle of the assessee at the time of the Tribunals decision dt. 19th Jan., 1989 but as on this date no decision to the contrary has been pointed out to us. Therefore, de hors the Tribunals decision dt. 19th Jan., 1989 on merits i.e., on factual as well as legal aspects the assessee should succeed.
11. This brings us to the other aspect; viz. desirability of departure from the view taken in the Tribunals decision dt. 19th Jan., 1989. As already noted, that decision of the Tribunal took note of the Honble Punjab & Haryana High Court decision in CIT vs. Ghansham Dass Mukim (supra) but declined to follow in on the plea that in that decision the Honble Punjab & Haryana High Court had not considered an aspect of the Supreme Court decision in Surjit Lal Chhabda (supra) as noted in para 5 above. Now, the point is that that aspect has since been considered and clarified in the Madras High Court (FB) decision on page 124 of the reports (182 ITR) in the last para of the decision. Therein, it is clearly stated that in the cases in which gift is received "the primary rule of intention of the donor should be applied". In Surjit Lal Chhabdas case (supra) the assessee already held that property as an individual which he wanted to throw into the common hotchpot of the HUF and the Honble Supreme Court held that until a son was born the character of the property would not change. The position is entirely different when the property is received from a different source, e.g., any gifts from others. This sort of clarification having been pointed out specifically in the Full Bench decision of the Honble Madras High Court in the case of CIT vs. M. Balasubramanian (supra) it should provide adequate justification for departure from the earlier decision of the Tribunal.
12. The learned Departmental Representative emphasised first that the earlier decision of the Tribunal dt. 19th. Jan., 1989 took note of the Honble Punjab & Haryana High Court decision in Ghansham Dass Mukim (supra) but chose, for the reasons given therein, not to follow it primarily on the footing that another decision of the apex Court, viz., Surjit Lal Chhabda (supra) was applicable. He, therefore, submitted that on this aspect of the matter, there is no change and therefore, a Tribunals decision in assessees own case should be followed in these years also. He further argued that the original decision of the Honble Madras High Court in the case of CIT vs. M. Balasubramanian (supra) was neither cited nor considered in the Tribunals decision dt. 19th Jan., 1989 and hence reversal thereof by the Full Bench did not make any difference in regard to the reasoning given in the Tribunals order.
13. Indeed these are very tempting arguments. But a careful consideration would warrant their rejection. As already indicated the original order of the the Tribunal dt. 19th Jan., 1989 did not follow the Punjab & Haryana High Court decision in Ghansham Dass Mukim (supra) on the plea that the decision of the Supreme Court in Surjit Lal Chhabda (supra) had not been appropriately considered therein. Now, by the Full Bench decision of the Madras High Court in (1990) 182 ITR 117 (Mad) (FB) that point stands clarified. This clarification is contained in the decision which is rendered after the date of the original decision of the Tribunal viz. 19th Jan., 1989. Secondly, in regard to the original decision of the Honble Madras High Court which was in favour of the Department we have already noted that from assessees angle it was worse and could have been considered as distinguishable from the assessees case. It is possible that it was not cited by the learned Department Representative for that reason. Viewing this from slightly different angle it also means that when in a case worse from the assessees angle a decision is rendered subsequently by the Full Bench of the Madras High Court the benefit of that decision should not be denied to the assessee. These was one incidental point which was mentioned by the learned Departmental Representative. The learned C. A. had mentioned that there was no decision to the contrary available and hence the decisions in favour of the assessee should be followed. The learned Departmental Representative submitted that in the original decision of the Honble Madras High Court in (1981) 132 ITR 529 (Mad) (supra) many decisions have been considered and, therefore, it should not be regarded as a case of no contrary decision being available even after the Full Bench decision of the Madras High Court in (1990) 182 ITR 117 (Mad) (FB) (supra). On this aspect also we agree with the learned C. A. that apart from making this argument no decision actually has been pointed out. The point is that the Honble Madras High Courts original decision approached the point right from basics and, therefore, had to consider many decisions. It was not a case wherein some contrary decision was being distinguished. Be that as it may, no contrary decision has been brought to our notice and none is otherwise also known to us.
14. For all these reasons, it has to be held now that the incomes attributable to the gifts given by the assessees father to the assessees HUF comprising of himself, his wife and his daughter(s) should be assessed in the hands of HUF and not in the hands of individual. On this point, we would accept the assessees plea and delete the corresponding additions from the assessment of the individual.
15. The assessees both the appeals are allowed.