Madhya Pradesh High Court
Kishanlal Moolchand vs Commissioner Of Income-Tax on 1 August, 1986
Equivalent citations: [1987]166ITR449(MP)
JUDGMENT G.G. Sohani, J.
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 :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the whole of the income from the aforesaid private trust was assessable in the hands of the assessee as the income of the assessee ?"
2. The material facts giving rise to this reference, briefly, are as follows:
3. The assessee is assessed in the status of an individual and the assessment year in question is 1971-72, the accounting year for which ended on Diwali, 1970. The assessee and his father had constituted a Hindu undivided family. A partition was effected between the assessee and his father on June 19, 1961, and a memorandum of partition was executed on July 9, 1961. As a result of that partition, the assessee received a sum of Rs. 50,000 as his share. The assessee created a private trust of the whole of the amount which he had received in partition by a registered deed of trust dated July 10, 1961. The trust was for the benefit of the assessee his wife, a minor daughter and the children that the assessee might beget in future. While framing the assessment for the assessment year in question, the Income-tax Officer held that the income of the trust was taxable in the hands of the assessee. The appeal preferred by the assessee before the Appellate Assistant Commissioner was dismissed. On further appeal before the Tribunal, the Tribunal held that the assessee dealt with the property which he had received in partition as if it were his individual property and converted it into trust property. In this view of the matter, the Tribunal held that the provisions of Section 62(2) and Section 64 of the Act were attracted. The Tribunal, therefore, dismissed the appeal. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.
4. Shri Chitale, learned counsel for the assessee, contended that the property received by the assessee on partition belonged to the Hindu undivided family of the assessee, his wife and his minor daughter and the Tribunal erred in holding that it was the individual property of the assessee of which the trust was created. Reliance was placed on the decisions in N.V. Narendranath v. CWT [1969] 74 ITR 190 (SC) and CIT v. Krishna Kumar [1983] 143 ITR 462 (MP) [FB]. In reply, Shri Mukati, learned counsel for the Revenue, contended that the assessee had treated the property received by him in partition as his individual property and, hence, the Tribunal was justified in holding that the income of the trust was liable to be assessed in the hands of the assessee. Reliance was placed on the decisions in Surjit Lal Chhabda v. CIT [1975] 101 ITR 776 (SC) and CIT v. Vishnukumar Bhaiya [1983] 142 ITR 357 (MP).
5. 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.
6. Our answer to the question referred to this court is, therefore, in the negative and in favour of the assessee. In the circumstances of the case, parties shall bear their own costs of this reference.