Commissioner of Income Tax vs V. Rajkumar

N.V. Balasubramanian, J.—At the instance of the Department, the Income Tax Appellate Tribunal has stated a case and referred the

following question of law u/s 256(1) of the Income Tax Act, 1961, for our opinion :

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the reunion was valid and effective

in respect of properties brought into the recreated joint family and, therefore, the interest amount of Rs. 29,700 which accrued on the deposit of

Rs. 1 lakh contributed by the Hindu undivided family consisting of father and son, shall be added to the income of the bigger Hindu undivided

family only and not to the income of the assessee-family ?

There was a joint Hindu undivided family consisting of two coparceners, namely one A. M. Vaiyapuri Chettiar and his son V. Rajkumar. There

was a total partition of the family on April 14, 1971, and the partition was accepted by the Income Tax Officer and he passed an order u/s 171 of

the Income Tax Act, 1961 (hereinafter referred to as ""the Act""). On October 1, 1979, Vaiyapuri Chettiar and Rajkumar executed a document

called ""deed of declaration of reunion"" by which, they have reunited constituting a Hindu undivided family. After the reunion, the father and the son

brought a fixed deposit of Rs. 50,000 each to the Hindu undivided family and declared that the joint family alone would hold the rights in respect of

these assets totalling a sum of Rs. 1,00,000.

The assessee Rajkumar, as a karta of the Hindu undivided family (specified) in the return filed for the assessment year 1982-83 claimed

exemption of a sum of Rs. 14,850 on the ground that the interest earned on the deposit made by him to the bigger joint family cannot be included

in the hands of the specified Hindu undivided family in which Rajkumar is the karta. The Income Tax Officer, however, rejected the claim of the

assessee on the ground that the department has not accepted the claim of reunion after the partition of the joint family. There were appeals to the

Appellate Assistant Commissioner and the Appellate Tribunal against the order of the Income Tax Officer refusing to accept the claim of the

reunion and ultimately, the matter came up for consideration before this court in the case of Commissioner of Income Tax Vs. A.M. Vaiyapuri

Chettiar and Another, and this court held that the reunion was valid. But the entire properties of the erstwhile family prior to the partition would be

the properties of the reunited joint family. The result is that after the decision of this court holding that the reunion is valid, it is not permissible for

the Income Tax Officer to include the income arising out of the contribution of Rs. 50,000 made by the assessee in the hands of the specified

Hindu undivided family. The income arising out of the contribution of Rs. 50,000 is liable to be included only in the hands of the Hindu undivided

family consisting of Vaiyapuri Chettiar and Rajkumar. The Tribunal has come to a correct conclusion in holding that the reunion was valid and

effective and that the income arising out of the contribution of Rs. 50,000 cannot be included in the hands of the assessee-Hindu undivided family.

Accordingly we answer the question of law referred to us in the affirmative and against the Revenue. No costs.