Karnataka H.C : Whether the property which is the subject matter of the suit is the property belonging to the Hindu Undivided Family or belonging to its members as individual property?

High Court Of Karnataka

CIT, Central Circle vs. D.L. Nandagopala Reddy (Indl)

Assessment Years : 1995-96 To 1998-99

Section : 4

N. Kumar And B. Manohar, JJ.

IT Appeal Nos. 159 To 162 Of 2007

April 9, 2013

JUDGMENT

N. Kumar, J. – All these appeals are preferred by the Revenue. These appeals involve a common question of law but for different assessment years i.e. 1995-96 to 1998-99 in respect of the very same assessee. The substantial question of law that arise for consideration in these appeals is :

Whether the property which is the subject matter of the suit is the property belonging to the Hindu Undivided Family or belonging to its members as individual property?

2. It is not in dispute that the property which is the subject matter of the suit, originally belongs to one Venkateshwaraiah. Laxmaiah Reddy son of Venkateshwaraiah took his share in the joint family properties and executed a release deed in favour of the remaining members of the joint family under a registered release deed dated 23-11-1927. Laxmaiah Reddy had no sons. Therefore, he adopted Nandagopala Reddy who is the assessee under a registered Adoption Deed dated 25-6-1956 and bequeathed all his properties in favour of the adopted son Nandagopala Reddy. Laxmaiah Reddy died in the year 1976 his wife Akkayyamma died in the year 1964. Therefore, the Will came into effect after the death of Laxmaiah Reddy.

Even otherwise on the death of Laxmaiah Reddy, his adoptive son becomes the sole surviving co-parcener. He in turn had distributed the property in favour of his wife and children. There is no registered document evidencing the same. But it is by oral partition which is evidenced by a memorandum of partition dated 6-8-1998. A transaction was entered into by the assessee with the builder for the development of the property. Consideration received by the assessee and his wife is treated as their individual income and assessed to tax. The assessee’s contention that it was joint family property income was negatived by the Assessing Authority. The Appellate Authority affirmed the finding recorded by the Assessing Authority, against the said order the assessee preferred an appeal to the Tribunal. The Tribunal reversing the finding recorded by the authorities below held that in the light of the admitted fact that the property in question is the property belonging to HUF and granted relief to the assessee. It is against this order, the present appeals are filed.

3. Learned counsel for the Revenue contends that when Laxmaiah Reddy got the property under a release deed, it ceases to be the joint family property. Subsequently when that property was bequeathed in favour of the Nandagopala Reddy, the assessee became the owner of the properties after the death of Laxmaiah Reddy. Therefore, it is a separate property and therefore, the authorities were justified in assessing the income derived therefrom as separate property of the Nandagopala Reddy. We do not find any substance in the said contention.

4. The facts are not in dispute. The property originally belonged to Hindu Undivided Family. One of the members of the family went out of the joint family under a Release Deed and the remaining members continued to the members of joint family. After the death of Laxmaiah Reddy, the assessee became the sole surviving co-parcener and he had executed a Will, in favour of the adopted son. On his death, the Will has become unenforceable. In fact, he could not have executed the Will in respect of the joint family property or at any rate to the extent of the share of his adopted son, as the adopted son acquired half share by birth i.e. on the date of adoption. Even otherwise, on his death, when this property came to the hands of the assessee it was not his self-acquired property. It was the property belonging to the Hindu Undivided Family. He has given a portion of the property to his wife, that is permissible only if it is Hindu Undivided Family. If it is self-acquired property, he should have given that property only by registered document. In that view of the matter, the Tribunal properly appreciating the material produced before the court has rightly came to the conclusion that the property is a joint family property not the separate property of the assessee or his wife.

5. In that view of the matter, we do not see any merit to interfere with the order passed by the Tribunal. Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue. No merits. Dismissed.

[Citation : 360 ITR 377]