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TMI Blog2002 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... s excluding only the share of the deceased, Shri Digambar Hari Ranade? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in consequence of question No.1, in holding that the notice under section 148 was untenable in law since the Hindu undivided family did not exist, and that the capital gains arising on the sale of the Hindu undivided family property was not taxable in the Hindu undivided family's hands?" The brief facts relevant for the purpose herein are as follows: Mr. Digambar Hari Ranade (since deceased) became an owner of the immovable property situated at 1381, Shukrawar Peth, Pune, pursuant to the partition deed dated January 27,1930, that took place between Bhaskar H. Ranade, Digambar H. Ranade and their fathers. The said Digambar H. Ranade died on April 7,1965. On July 12,1965, the names of the following legal heirs of the deceased were entered in the City Survey Record and also in the Municipal record, in respect of the aforesaid property of the deceased: (1) Smt. Malti D. Ranade; (2) Shri Shrihari D. Ranade; (3) Shri Vishnu D. Ranade; and (4) Shri Vishwas D. Ranade. On June 5,1975, all these four legal heirs entered into an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice issued under section 148 of the Income-tax Act on the ground; firstly, that the Hindu undivided family was never assessed to tax so far and, therefore, the question of claiming for any partition under section 171 of the Income-tax Act did not arise, secondly, there was no income assessable in the hands of the Hindu undivided family and, thirdly, the Income-tax Officer had already taxed the capital gains arising out of the sale of the immovable property, in the hands of the individuals. Even on the merits, the Commissioner of Income-tax (Appeals) held that in the light of the decision of the apex court in the case of Gurupad Khandappa Magdum v. Hirabai Khandappa Magdum [1981] 129 ITR 440, on the death of Shri Digambar H. Ranade in 1965, the Hindu undivided family was notionally partitioned and the property thereafter did not belong to the Hindu undivided family because the Hindu undivided family did not survive. The Commissioner of Income-tax (Appeals) accordingly cancelled the assessment order made under section 144 read with section 147(a) of the Income-tax Act, 1961. On further appeal filed by the Revenue, the Income-tax Appellate Tribunal, while upholding the findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth sides. As regards the first question is concerned, the apex court in the case of Gurupad Khandappa Magdum [1981] 129 ITR 440 had laid down the proposition that when a female member who inherits an interest in the joint family property under section 6 of the Hindu Succession Act, files a suit for partition expressing her willingness to go out of the family, then, she would be entitled to get both the interest she has inherited and the share she would have been notionally allotted to her, as stated in Explanation 1 to section 6 of the Hindu Succession Act. The apex court in the case of State of Maharashtra v. Narayan Rao Sham Rao Deshmukh [1987] 163 ITR 31 (SC) has considered the scope and ambit of the ratio laid down in Magdum's case [1981] 129 ITR 400 and held as follows: "We have carefully considered the above decision and we feel that this case has to be treated as an authority for the position that when a female member who inherits an interest in the joint family property under section 6 of the Act files a suit for partition expressing her willingness to go out of the family, she would be entitled to get both the interest she has inherited and the share which would have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 1965, each of the four legal heirs were holding 1/4 th share in the estate of the deceased as tenants in common and that in the year 1975 they agreed to sell their respective 1/4 th share to M/s. A.V. Apte and Co. The Income-tax Officer has held that the Hindu undivided family was in existence all through, because in the agreement for sale entered into with M/s. A.V. Apte and Co., the legal heirs have stated that each of them are selling 1/4 th share in the Hindu undivided family property. In our opinion, mere use of the words "Hindu undivided family property" in the agreement for sale cannot be the basis for holding that the Hindu undivided family existed on the date of sale. What was agreed to be sold was 1/4 th share of each individual as co-sharer and the sale was not effected as the property belonging to the Hindu undivided family. Similarly, the release deed dated June 12,1975, executed by the married daughter after the agreement for sale does not establish existence of the Hindu undivided family. In fact, the release deed of the married daughter fortifies the contention of the legal heirs that on the death of Digambar Ranade, it was decided that the four heirs will t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment. Therefore, in the facts of this case, the capital gains have been rightly assessed in the hands of the individuals and not in the hands of the Hindu undivided family. Once it is held in the facts of the present case, that the capital gains on the sale of the immovable property are not taxable in the hands of the Hindu undivided family, the notice issued. Under section 148 of the Income-tax Act cannot be sustained. Accordingly, we answer question No.3 in the affirmative and in favour of the assessee. To sum up, we answer the questions referred as follows: Question No.1 is answered in the negative, that is, in favour of the Revenue and against the assessee. Question No.2 is answered by holding that the Tribunal was justified in treating the entire capital gains arising out ..... X X X X Extracts X X X X X X X X Extracts X X X X
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