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Commissioner of Income-tax Vs. Late Kanhaiya Lal - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 374 of 1963
Judge
Reported in[1970]75ITR702(All)
ActsIncome Tax Act, 1922 - Sections 16(3) and 66(1)
AppellantCommissioner of Income-tax
RespondentLate Kanhaiya Lal
Appellant AdvocateShanti Bhushan, Adv. General and ;R.R. Misra, Adv.
Respondent AdvocateB.D. Agarwal, ;B.P. Agarwal and ;Ashok Gupta, Advs.
Excerpt:
- .....in that document he declared that certain property detailed in the deed formed part of the joint family property. the income-tax: officer took the view that that declaration in the deed dated november 19, 1955, was ineffective, and the property in question was property of kanhaiya lal as an individual. he was, therefore, assessed on that basis. this decision was upheld in appeal by the appellate assistant commissioner. but the assessee succeeded before the tribunal. the tribunal held that the property in question belonged to the hindu undivided family, and that it could not be assessed in the hands of kanhaiya lal as an individual. at the request of the commissioner of income-tax, u. p., the appellate tribunal has referred the following two questions to this court:'(1) whether any.....
Judgment:

V.G. Oak, C.J.

1. This is a reference under Section 66(1) of the Indian Income-tax Act, 1922. Kanhaiya Lal is the assessee. He was assessed as an individual for three assessment years, 1956-57, 1957-58 and 1958-59. He was also the head of a Hindu undivided family consisting of himself and his three sons. On November 19, 1955, Kanhaiya Lal executed a deed of declaration. In that document he declared that certain property detailed in the deed formed part of the joint family property. The Income-tax: Officer took the view that that declaration in the deed dated November 19, 1955, was ineffective, and the property in question was property of Kanhaiya Lal as an individual. He was, therefore, assessed on that basis. This decision was upheld in appeal by the Appellate Assistant Commissioner. But the assessee succeeded before the Tribunal. The Tribunal held that the property in question belonged to the Hindu undivided family, and that it could not be assessed in the hands of Kanhaiya Lal as an individual. At the request of the Commissioner of Income-tax, U. P., the Appellate Tribunal has referred the following two questions to this court:

'(1) Whether any registered deed of transfer is necessary for blending the separate immovable properties of a coparcener with the coparcenary properties ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the aforesaid separate properties of late Sri Kanhaiya Lal assume the character of coparcenary properties with effect from November 19, 1955, and consequently, were not assessable in the hands of Sri Kanhaiya Lal as individual ?'

2. In R. Subramania Iyer v. Commissioner of Income-tax, [1955] 28 I.T.R. 352, it was held by the Madras High Court that there is nothing to prevent a father from impressing upon any self-acquired property belonging to him, the character of joint family property. No formalities are necessary in order to bring this about, This decision of the Madras High Court was noticed by the Supreme Court in Commissioner of Income-tax v. M.R. Stremann, [1965] 56 I.T.R. 62 (S.C.).

3. The facts in the last case were these : After the death of his father in1936, the assessee realised a sum of Rs. 26,000 from the properties inheritedfrom his father and purchased a house which was joint family property inhis hands. Sons were born to him in 1944 and 1945. On December 19,1952, a deed of partition of certain properties was executed between theassessee, his minor sons and minor daughter. It was stated in the partitiondeed that the assessee had been earning commission and acquiring properties and he was blending his money with the assets inherited from his fatherand treating the entire properties before and after the birth of the sons, as joint family property. It was held that there was no direct or indirect transfer of assets to the minor children by the assessee within the meaning of Section 16(3)(a)(iv) of the Indian Income-tax Act, 1922.

3. These decisions support the stand taken by the assessee that no formalities are necessary for the merger of a coparcener's self-acquired property into coparcenary property. No registered instrument is necessary. After such merger, such property cannot be treated as the coparcener's separate property. The two questions referred to this court must be answered in the assessee's favour.

4. We answer question No. 1 referred to this court in the negative, and in favour of the assessee. Our answer to question No. 2 is in the affimative. and in favour of the assessee. The Commissioner of Income-tax, U.P. shall pay the opposite party Rs. 300 as costs of the reference.


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