Commissioner of Income Tax vs S.M.M. Muthappa Chettiar and Another

N. V. Balasubramanian, J.—The tax cases relate to two assessment years, viz., 1978-79 and 1979-80. The points involved are common

and the following two questions of law have been referred to us at the instance of the Department :

Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the interest credited to the accounts of the family

members of the assessee-Hindu undivided family is not liable to be included in the assessee''s income ?

Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that the assessee is entitled to deduction u/s 80L of

the Act on the ground that the Malaysian income in the case of SM. M. Muthappa Chettiar has been deleted from his total income and as a

consequence the assessee ceased to be a specified Hindu undivided family with a member having taxable income ?

In so far as the first question of law is concerned, the Income Tax Officer allowed (sic) the interest credited to the accounts of certain family

members of the Hindu undivided family in the hands of the assessee on the ground that there was no valid partition and the amount continued to

belong to the joint family. The Appellate Assistant Commissioner and the Tribunal held that the partial partition claimed by the assessee was valid

and the amount set apart under the said partition did not belong to the assessee-family. The Appellate Tribunal followed its earlier orders and

rejected the appeal by the Department.

The earlier order of the Appellate Tribunal in the assessee''s own case, was the subject-matter of consideration before this court in

Commissioner of Income Tax/Commissioner of Wealth-tax/Commissioner of Gift-tax Vs. S.M.M. Muthappa Chettiar, wherein this court held that

the finding of the Appellate Tribunal that there was a valid partition was legally correct and there was no ground to interfere and, therefore, a sum

of Rs. 60,000 kept as deposit did not belong to the joint family and the interest accruing on the said deposit cannot be regarded as an income of

the joint family. Accordingly, we answer the first question of law referred to us in the affirmative, against the Revenue and in favour of the assessee.

In so far as the second question of law is concerned, it relates to the grant of deduction u/s 80L of the Act. The assessee is a Hindu undivided

family and one of its members SM. M. Muthappa Chettiar had certain Malaysian income and the same was assessed in his individual status. The

Income Tax Officer, denied the benefit of deduction u/s 80L of the Act, because the assessee had a member who had more than the taxable

income in his individual assessment, and the assessee was a specified Hindu undivided family. The Appellate Assistant Commissioner as well as the

Appellate Tribunal held that as one of the members of the family, SM. M. Muthappa Chettiar did not have any income exceeding the taxable limit,

as the Malaysian income which was included in his individual assessment was deleted by the Appellate Tribunal in I. T. A. No. 1267/Mds of 1983,

by order dated October 27, 1983, and the assessee cannot be regarded as a specified Hindu undivided family. That earlier order of the Appellate

Tribunal deleting the addition of Malaysian income in the hands of SM. M. Muthappa Chettiar, a member of the assessee family, came up for

consideration before this court in T. C. No. 136 of 1985, and this court by its judgment dated March 15, 1994, held that the income from

Malaysia cannot be subjected to tax in the hands of SM. M. Muthappa Chettiar and, consequently, the income was deleted in his assessment. The

effect of the decision is that the assessee family cannot be said to have a member who is having an income exceeding the taxable limit and the

assessee family cannot be regarded as a specified Hindu undivided family disentitling it to claim the relief u/s 80L of the Act. We are of the view

that the Tribunal was correct in holding that the assessee was entitled to deduction u/s 80L of the Act. We answer the second question of law also

in the affirmative, against the Revenue and in favour of the assessee. The assessee is entitled to costs of Rs. 750.