COMMISSIONER OF INCONE TAX vs. HEIRS OF R N SHAH- GIRISHKUMAR R SHAH

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ITR/83/1986HC GujaratGJHC24010707198616 January 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH3 pages
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What did the High Court hold?

The High Court, in view of the principle laid down in the case of CIT v. Ramanlal Nagindas Shah (1992) 195 ITR 9, answered the questions. Questions 1 and 2, referred at the instance of the Revenue, were answered in favour of the assessee and against the Revenue. This implies the Court held that Rasiklal's share income was not taxable in his hands as Karta of the smaller HUF, and consequently, the minor sons' incomes were not clubbable with his share income under the conditions stipulated in those questions. Question 3, referred at the instance of the assessee, was answered in favour of the Revenue and against the assessee. This means the Court held that Rasiklal's share income was indeed taxable to some extent in the hands of the larger HUF, contrary to the assessee's contention. The reference was disposed of accordingly, with no order as to costs. The specific reasoning for each answer is not detailed beyond the reliance on the cited precedent.

What were the facts?

This case concerns Assessment Year 1976-77 and involves a reference to the High Court of Gujarat at Ahmedabad. The Income Tax Officer (ITO) treated the assessee's status as an individual, contrary to the assessee's claim of HUF status. The ITO also included the share of minors in the hands of the assessee under Section 64. The share of income derived by the assessee from the partnership firm M/s. Nahalchand Dhanjibhai & Co. was held not taxable in the hands of the larger HUF, which comprised the assessee, his wife, their major son Sureshchandra, minor sons Girishkumar and Narendrakumar, and their minor unmarried daughters. The Income Tax Appellate Tribunal (ITAT) made references to the High Court at the instance of both the Commissioner of Income Tax and the assessee.

What were the issues?

1. Whether, on the facts and circumstances, the ITAT was right in holding that the share income received by Rasiklal from M/s. Nahalchand Dhanjibhai & Co. was taxable in his hands as Karta of a smaller HUF (himself, wife, and two minor sons)? (Question referred by Revenue) 2. Whether, on the facts and circumstances, the ITAT was right in holding that the share incomes of Girishkumar and another minor son from M/s. Nahalchand Dhanjibhai & Co. were not clubbable with Rasiklal's share income if that income was taxable in Rasiklal's hands as Karta of the smaller HUF? (Question referred by Revenue) 3. Whether, on the facts and circumstances, the ITAT was right in holding that the share income derived by partner Rasiklal from M/s. Nahalchand Dhanjibhai & Co. was to no extent taxable in the hands of the larger HUF (comprising Rasiklal, his wife, major son Sureshchandra, minor sons Girishkumar and Narendrakumar, and minor unmarried daughters)? (Question referred by Assessee) Revenue's Contention: The Revenue argued that the controversies were concluded by the decision in CIT v. Ramanlal Nagindas Shah (1992) 195 ITR 9. Assessee's Contention: The assessee argued for HUF status and against clubbing of minor's income.

Which sections of the Income-tax Act were involved?

Section 64

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 83 of 1986

For Approval and Signature:

Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCONE TAX Versus HEIRS OF R N SHAH- GIRISHKUMAR R SHAH -------------------------------------------------------------- Appearance: MR MANISH R BHATT for Petitioner NOTICE SERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH

Date of decision: 16/01/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL)

At the instance of Commissioner of Income-tax, Gujarat-IV, Ahmedabad, the Income Tax Appellate Tribunal, Ahmedabad Bench 'B', has referred following two questions of law for opinion of this Court in respect of Assessment Year 1976-77 :

1.

Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the share income received by Rasiklal from the partnership firm M/s. Nahalchand Dhanjibhai & Co. during the previous year under consideration was taxable in his hands in his capacity as Karta of the smaller HUF as comprised by himself, his wife and their two minor sons?

2.

Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the share incomes derived by Girishkumar, two minor sons of partner Rasiklal from the partnership firm M/s. Nehalchand Dhanjibhai & Co. during the previous year under consideration were not clubbable with the share income derived by Rasiklal from the said firm if that share income was taxable in Rasiklal's hands in his capacity as Karta of the smaller HUF ?

At the instance of the assessee, the Income Tax Appellate Tribunal has also referred following question of law for opinion of this Court arising out of R.A. No. 859/Ahd/1985, in respect of Assessment Year 1976-77 :

"Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the share income derived by partner Rasiklal from partnership firm M/s. Nahalchand Dhanjibhai & Co. during the previous year under consideratioin was to no extent taxable in the hands of larger HUF comprised by Rasiklal, his wife and their major son Sureshchandra, their minor sons Girishkumar and Narendrakumar and their minor unmarried daughters ?"

2.

The Income-tax Officer took the status of the assessee as individual as against HUF claimed by him. The I.T.O. also included the shareof minor under section 64 in the hands of the assessee. Further the share of income derived by the assessee from the partnership firm M/s. Nahalchand Dhanjibhai & Co. during the previous year under consideration was held not to be taxable in the hands of the larger HUF comprised by the assessee, his wife and their major son Sureshchandra, their minor sons Girishkumar and Narendrakumar and Rajendrakumar as well as their minor unmarried daughters.

3.

Though the respondent is duly served, he has not appeared in the proceedings.

4.

We have heard the learned counsel for the Revenue. The learned counsel for the Revenue states at the Bar that the controversies raised in the present Reference are concluded by the decision rendered in the case of brother of the assessee reported in CIT v. Ramanlal Nagindas Shah (1992) 195 ITR 9. 5. In view of the principle laid down by the High Court in the above quoted decision, Questions no.1 & 2 referred at the instance of the Revenue, are answered in favour of the assessee and against the Revenue; whereas Question No.3, which is referred at the instance of the assessee, is answered in favour of the Revenue and against the assessee. The Reference accordingly stands disposed of, with no order as to costs.

( J.M.Panchal,J.)

( M.S.Shah, J.)

(patel)

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