COMMISSIONER OF INCOME TAX vs. RAMANLAL NAGINDAS SHAH

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ITR/78/1986HC GujaratGJHC24010702198616 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 learned counsel for the Revenue stating that the controversies were concluded by the decision 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 Tribunal's finding that the share income was taxable in Ramanlal's hands as Karta of the smaller HUF, and that the minor son's income was not clubbable in that scenario, was upheld. Question 3, referred at the instance of the assessee, was answered in favour of the Revenue and against the assessee. This means the Tribunal's finding that the share income was not taxable in the hands of the larger HUF was overturned, and it was held to be taxable in the hands of the larger HUF. The reference was disposed of accordingly.

What were the facts?

This case concerns Assessment Year 1976-77 and involves a reference from the Income Tax Appellate Tribunal (ITAT) at the instance of the Commissioner of Income-tax (Revenue) and the assessee, Ramanlal Nagindas Shah. 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 a minor son in the assessee's income under Section 64. The ITO further held that the share income derived by the assessee from the partnership firm M/s. Nahalchand Dhanjibhai & Co. was not taxable in the hands of the larger HUF, which comprised the assessee, his wife, major sons, minor son, and minor unmarried daughters. The respondent (assessee) did not appear before the High Court.

What were the issues?

1. Whether, on the facts and circumstances, the Appellate Tribunal was right in law in holding that the share income received by Ramanlal from the partnership firm M/s. Nahalchand Dhanjibhai & Co. during the previous year was taxable in his hands as the Karta of a smaller HUF comprising himself, his wife, and their two unmarried daughters? (Question of law, turns on interpretation of HUF status and income attribution). 2. Whether, on the facts and circumstances, the Appellate Tribunal was right in law in holding that the share income derived by Dilipkumar, Ramanlal's minor son, from the partnership firm M/s. Nahalchand Dhanjibhai & Co. was not clubbable with Ramanlal's share income if that income was taxable in Ramanlal's hands as Karta of the smaller HUF? (Question of law, turns on clubbing provisions and HUF status). 3. Whether, on the facts and circumstances, the Appellate Tribunal was right in law in holding that the share income derived by partner Ramanlal from M/s. Nahalchand Dhanjibhai & Co. was to no extent taxable in the hands of the larger HUF comprising Ramanlal, his wife, their major sons, minor son, and minor unmarried daughters? (Question of law, turns on HUF status and income attribution). Assessee's Contention: The assessee claimed the income was taxable in the hands of the larger HUF. The ITAT's decision on this point is being challenged by the Revenue. Revenue's Contention: The Revenue argued that the share income was taxable in the hands of the individual or the smaller HUF, and the minor's income should be clubbed. The Revenue relies on the decision in CIT v. Ramanlal Nagindas Shah (1992) 195 ITR 9.

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 78 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 INCOME TAX Versus RAMANLAL NAGINDAS SHAH -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 78 of 1986 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 'SMC', 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 Ramanlal 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 unmarried daughters ?

2.

Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in law in holding that the share income derived by Dilipkumar, minor son of partner Ramanlal from the partnership firm M/s. Nahalchand Dhanjibhai & Co. during the previous year under consideration was not clubbable with the share income derived by Ramanlal from the said firm if that share income was taxable in Ramanlal'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. 860/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 Ramanlal 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 Ramanlal, his wife and their major sons Jayantilal and Rajendrakumar and minor son Dilipkumar 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 sons Jayantilal and Rajendrakumar as well as minor son Dilipkumar and 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 this very assessee rendered 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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