1. They two appeals filed by the department relate to the same assessee. They raise a common issue for decision and are directed against the common order dated 15-7-1983 of the AAC relating to the assessment years 1977-78. Hence, they are heard together and disposed of by this common order for the sake of convenience.
2. In these two appeals I am concerned with the assessment year 1977-78, the previous year of which ended 30-6-1976 and the assessment year 1978-79, the previous year of which ended on 39-6-1977.
3. The assessee Manoharlal, J. Karlo filed the returns in the status of an HUF consisting of himself as the karta and his wife as the only other member of the family during the two previous years under consideration. It may be stated that the assessee was blessed with a son only on 14-12-1977, i.e., after the close of the previous year 1976-77. In these returns, the assessee showed income from property and 50 per cent share profit in a firm styled Jethanand Manoharlal. The assessee became a partner in the aforesaid firm in 1973-74. The case of the assessee was that he, along with his brother, received gifts from his father and mother and that the gifts were given for the benefit of the HUFs that would come into existence after the sons got married in due course. The assessee claimed that he became a partner in the aforesaid firm with the help of the aforesaid gifted funds meant for the benefit of the family of which he was the karta. Hence, he claimed the joint family status in respect of the income arising out of the investment of the said gifts as the income of the joint family of which he was the karta. In respect of the above claim, he relied on the decision f the Supreme Court in the case of Arunachal Mudaliar v. Muruganatha Mudaliar : 1SCR243 wherein it has been held that if the intention of the gift is clear to the effect that it will be enjoyed by the family of the done, then the receipt of the income arising therefrom belonged to the family of the done and not the the donee in his individual capacity. As there was no contemporaneous evidence, an affidavit sworn by the father of the assessee on 24-10-1979 has been filed before the ITO. This affidavit states that gifts were given by the donor to the assessee for the benefits of the family of the assessee.
4. The ITO did not accept the claim of the assessee. He found that there was no mention in the partnership deed that the two brothers were representing their joint families. Further, he was of the opinion that the intention of the donor was not very clear. Hence, he held that the income returned by the assessee in the status of an HUF really belonged to him in his individual capacity. However, he made a protective assessment on the HUF on the basis of the return filed by it.
5. The assessee appealed to the AAC. The AAC found that the assessee got married on 16-5-1976 and that he received certain gifts from his father and mother which were invested in the aforesaid firm. He accepted the claim of the assessee that the status should be taken as that of an HUF after the marriage of the assessee on 16-5-1976. He also held that the affidavit 24-10-1979 showed the clear intention to the effect that the gifts should be enjoyed by the family of the donee. Hence, he held that the status of the assessee should be taken as that of an HUF as a substantive measure and not as a protective measure.
6. Smt. Vijayalakshmi, the learned representative for the department, urged before me that the learned AAC erred in his decision. She pointed out that there could be no joint family for then purpose of income-tax unless there are at least two coparceners. Thus, she urged that the decision of the AAC deserved to be vacated and that of the ITO deserved to be restored. Shri M. J. Kalro, the karta of the HUF, appeared in person before me and supported the order of the AAC. He stated that the affidavit dated 24-10-1979 was quite clear about the intention of the donor, namely, that the gifts should be enjoyed by the families of the donees as and when they come into existence. He relied on the decision in the case of Arunachal Mudaliar (supra) for this proposition. He urged that after the assessee got married in March 1976, he acquired the family and the income that he received from the gift of his father was, therefore, rightly assessed as the income of the HUF from that date.
7. I have considered the contention of both the parties as well as the facts on record. The dispute in these two appeals does not concern about the intention of the donor. In view of the affidavit filed on 24-10-1979, the intention of the donor that the gifts should be enjoyed by the family of his son may be accepted as correct. Even so, the main issue still survives for consideration. The point for decision in these two appeals is whether the assessee and his wife constituted a family before the birth of their son for the purpose of income-tax. This question has been considered by the Supreme Court in the case of Surjit Lal Chhabda v. CIT : 101ITR776(SC) . The principle laid down therein is that if a property belonged to a joint Hindu family at any time, then it will not cease to be the joint family property merely because, in course of time, the number of coparceners has been reduced to one. On the other hand, if a property never belonged to a joint family in the past, then it cannot become a joint family property until and unless there are at least two coparceners in the family. In view of the above proposition laid down by the Supreme Court, it is clear that the assessee and his wife could not form a joint Hindu family in respect of the gifted properties. It was never owned by any joint family in the past. The position will be different after the birth of the son. But, that event did not take place during the two previous years under consideration. In these two years there was only one coparcener and the property was never owned by a joint family in the past. Hence, respectfully, following the decision in the case of Surjit Lal Chhabda (supra), I come to the conclusion that the status of the assessee in respect of the income under consideration was wrongly shown by the assessee and accepted by the AAC as HUF. I, therefore, hold that the assessee should be assessed in the status of an individual in respect of the income under consideration during the two years covered in the present appeals. Hence, I vacate the orders of the AAC and restore those of the ITO.
8. In the result, these two appeals are allowed.