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2015 (8) TMI 166 - ITAT DELHI

2015 (8) TMI 166 - ITAT DELHI - TMI - Business and interest income - whether should be included in the assessee HUF’s total income? - Held that:- Hon’ble Delhi High Court vide its interim order dated 17.2.1984, determined 60% share as undisputed leaving 40% as disputed. Accordingly, a Receiver was appointed to collect rent from all the tenants and also make inventory of goods in the business of M/s Gupta Sports House. A final settlement was arrived at amongst all the family members only in the y .....

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m the estate of a deceased and there are provisions under the Act mandating the charge thereon, such income cannot go tax free. Therefore, direct the AO to tax the income from the estate of late Shri B.D. Gupta for the year under consideration in terms of section 168 of the Act. In so far as the assessee under consideration is concerned, there cannot be any inclusion of business or interest income in its hands. - ITA No.5636/Del/2014 - Dated:- 31-7-2015 - SHRI R.S. SYAL, JJ. For The Assessee : S .....

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rotective basis. At this juncture, it is relevant to mention that Shri B.D. Gupta expired intestate in 1970. Before his death, he had certain house properties giving income under the head Income from house property. Apart from that he had also set up a business in the name and style of Gupta Sports House . Litigation cropped up amongst the family members of Shri B.D. Gupta on the question of distribution of his properties. The matter was carried before the Hon ble Delhi High Court by one of the .....

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0% be given to the respective parties. The remaining 40% was held to be disputed. Some Administrator was appointed. 3. Shri Ramnik Gupta, a family member of Sh. B.D. Gupta, filed return for the year under consideration declaring remaining 40% of income in the hands of B.D. Gupta and Sons (HUF). The AO taxed 100% of the income as HUF s income. The assessee carried the matter before the first appellate authority, who held that only 40% was taxable in the hands of the assessee HUF. The Tribunal aff .....

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AO for deciding the issue de novo in the light of the scenario prevailing at that time. The AO, in the instant proceedings again taxed 100% income in the hands of the assessee HUF. The ld. CIT(A) divided total income in two parts, viz., first, being business income and interest income and the second, being house property income. It was held that business income and interest income belonged in entirety to the assessee HUF and, hence, assessable in its hands on substantive basis. As regards the i .....

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of the issues taken up by the assessee in its appeal. 4. I have heard the rival submissions and perused the relevant material on record. The short question before me is as to whether or not the business and interest income should be included in the assessee HUF s total income. In this regard, it is significant to go through the verdict of the Single Judge of the Hon ble Delhi High Court, a copy of which is available at page 46 onwards of the paper book. In para 15, the Hon ble High Court vide i .....

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e name of M/s Gupta Sports House, Connaught Circus, New Delhi. The Hon ble High Court directed: that business will have to be taken over and managed under the supervision of the receiver. Again, in para no. 32, it has been mentioned that Shri B.L. Anand, Advocate appointed as a Local Commissioner will go to the said shop (Gupta Sports House, F-25, Connaught Circus, New Delhi.) for making inventory of the goods and account books lying there. This discussion indicates that the business carried on .....

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y belongs to HUF. In the same way, the provisions of section 171 of the Act providing that a hindu family hitherto assessed as undivided shall be deemed for the purposes of this Act to continue to be a hindu undivided family, except where and in so far as a finding of partition has been given under this section in respect of the hindu undivided family, can apply only once a valid pre -existence of HUF is proved. If there is no valid HUF in existence, the provisions of section 171 for recording a .....

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aring some income. In view of the fact that the properties belonged separately to Shri B.D. Gupta before his death and he died intestate without executing any will, no HUF ever came into existence. In that view of the matter, no income can be logically considered as taxable in the hands of Shri B.D. Gupta, HUF. I, therefore, hold that the decision of the ld. CIT(A) in directing the business and interest income to be taxable in the hands of HUF, is not sustainable. 7. As noted above, the ld. AR h .....

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person", is meant the person who is liable to be taxed, according to law, with respect to a particular income. …..…. Where a person is taxed wrongfully, he is no doubt entitled to be relieved of it in accordance with law but that is a different matter altogether. The person lawfully liable to be taxed can claim no immunity because the AO (ITO) has taxed the said income in the hands of another person contrary to law . The crux of the judgment is that if a wrong person has been .....

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of beneficiaries as per the Settlement and the assessee has no relation with them and it is up to the Revenue to find such beneficiaries. I find that the Family settlement took place in the year 2004 and it is from such date that the shares of the beneficiaries came to be defined. In such circumstances, it cannot be said that the Family settlement shall be considered to have retrospective effect in the sense that when during the period anterior to such settlement, including the year in question, .....

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as the deceased. (2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),- (a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stag .....

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be, inter alia, liable to pay tax on the income of the deceased in the same manner as the deceased would have paid if he had not died. Any proceedings taken against the deceased before his death shall be continued against the legal representative and, further, any proceedings which could have been taken against the deceased if he had survived may also be taken against the legal representative. The crux of the matter is that legal representative is, inter alia, liable to pay tax in respect of in .....

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ere an association of persons; and for the purposes of this Act, the executor shall be deemed to be resident or non-resident according as the deceased person was a resident or nonresident during the previous year in which his death took place. (2) ….. (3) Separate assessments shall be made under this section on the total income of each completed previous year or part thereof as is included in the period from the date of the death to the date of complete distribution to the beneficiaries o .....

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son administering the estate of a deceased person. 11. A bare perusal of sub-section (1) of section 168 divulges that the income of the estate of the deceased shall be chargeable to tax in the hands of the executor. Sub-section (4) clarifies that if any income of the estate stands distributed to, or applied to the benefit of any specific legatee of the estate during that previous year, then that part of the income shall be excluded from the total income of the executor. However, such income shal .....

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es is that whereas the income earned by the deceased up to the date of his death is chargeable to tax in the hands of legal representative u/s 159, income arising from the estate of the deceased after the date of his death up to the date of complete distribution is chargeable to tax in the hands of executors on year to year basis. Thus, income of a deceased for the year of his death is bifurcated into two parts, viz., up to the date of his death which is taxed in the hands of legal representativ .....

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