Commissioner of Income Tax vs Niranjan Prakash Gupta and Sons

The Income Tax Appellate Tribunal, Allahabad has referred the following questions of law u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'') for opinion of this Court:

Whether on the facts and circumstances of the case, the Tribunal was legally correct in holding that the grounds for deletion of the Income of Rs. 1,52,551 from sale of land taken by the revenue are devoid of any force and the Income from sale of land had rightly been deleted from the total income of the assessee-HUF by the learned Commissioner (Appeals)?

Whether on the facts and circumstances of the case, the Tribunal was legally correct in following the decision of the Allahabad High Court in Kalluomal Tapashwari Prasad v. CIT 1973 Tax LR 697 on severance of status in the instant case concerning Sri Rakesh Kumar Gupta and Smt. Kaushalaya Devi with respect to immovable property?

The reference relates to the assessment year 1975-76.

Briefly stated the facts giving rise of the present reference are as follows:

The respondent-asscssee, M/s. Niranjan Prakash Gupta and Sons has filed return for the assessment year 1975-76 on 29-10-1975 disclosing income of Rs. 10,411 under the head ''Income from house property''. The Income Tax Officer has completed the assessment u/s 143(3)/144B of the Act on 17-3-1978 on total income of Rs. 1,62,993 which included income of Rs. 1,52,551 from sale of land. The transactions of the same have C been found as adventure in the nature of trade. On appeal by the assessee, the Commissioner (Appeals) vide his order dated 6-12-1979 has deleted the above amount of Rs. 1,52,551 holding that the appellant-HUF did not have any occasion to derive any benefit out of the sale proceeds of the land which did not belong to the HUF. On appeal by the revenue, the Tribunal dismissed the same holding that the grounds taken by the revenue are devoid of any force since the amount of Rs. 1,52,551 p. representing income from sale of land has rightly been deleted from the total income of the assessee-HUF for the assessment year under consideration. The Tribunal has relied upon the judgment of this court in the case of Kalloomal Tapashwari Prasad v. CIT 1973 Tax LR 697 (All) in which it has been held that where a severance in status has taken place, the HUF could not be treated as the owner of the property.

We have heard Sri Shambhoo Chopra, learned standing Counsel appearing for the revenue.

We find that there are certain agricultural land belonging to M/s. Niranjan Prakash Gupta and Sons, Meerut. During his life-time, Sri Niranjan Prakash Gupta executed a Will on 11-2-1973 bequeathing all his assets to his wife Smt. Kaushalaya Devi and his son Sri Rakesh Kumar Gupta in equal shares. On 14-3-1973, Sri Rakesh Kumar Gupta filed a suit in the court of the Sub-Divisional Magistrate, Meerut numbered as Suit.

No. 10 of 1974 claiming 50 per cent in the property belonging to the family of which his father Sri Niranjan Prakash Gupta was the Karta, by way of partition. Sri Niranjan Prakash Gupta died on 23-3-1973. A preliminary decree was passed by the Sub-Divisional Magistrate, Meerut on 30-10-1974 ordering that Sri Rakesh Kumar Gupta and Smt. Kaushalaya Devi would be entitled to one-half share in the property of late Sri Niranjan Prakash Gupta. On the basis of the above facts, the assessee has claimed partial partition in respect of agricultural lands belonging to the HUF in the assessment year 1973-74. After examining the parties as required under the provisions of Section 171(2) of the Act, the Income Tax Officer rejected the claim of partial partition. Though the Appellate Assistant Commissioner has directed to recognize the partition, the Tribunal has confirmed the above order of the Income Tax Officer refusing to recognize the partial partition of the agricultural lands in the assessment year 1973-74. In the assessment year 1974-75, the Tribunal set aside the order of the Appellate Assistant Commissioner for fresh adjudication as he had not decided the question whether there was an adventure in the nature of trade carried on by the assessee in respect of these lands. Thus the Tribunal by its above orders for assessment years 1973-74 and 1974-75 has refused to recognize the partition and conceded the element of income from agricultural lands. The Tribunal in its judgment under consideration has not disputed regarding the nature of income but deleted the income holding that this income could not have been taken and assessed as income of the assessee-HUF

As the claim of partition u/s 171(1) of the Act has been rejected by the Income Tax Officer, which order, has become final. In the absence of partition amongst the members of HUF having been recognized under the Act, for the purpose of taxation under the Act it would be deemed that the HUF is still continuing. The decision of this court in the case of Kalloomal Tapashwari Prasad (supra) relied upon by the Tribunal has since been reversed by the Apex Court in the case of Kalloomal Tapeswari Prasad (HUF), Kanpur Vs. Commissioner of Income Tax, Kanpur,

In this view of the matter, we are of the considered opinion that the Tribunal was not justified in deleting the amount of Rs. 1,52,551 derived from the sale of land.

We, accordingly, answer both the questions referred to us in the negative, i.e., in favour of the revenue and against the assessee. There will be no order as to costs.