Commissioner of Income Tax vs Virdhichand

The Tribunal has referred the following question of law arising out of its order dated 9-1-1980 in respect of the assessment years 1967-68 to 1969-70 u/s 256(1) of the income tax Act, 1961 (''the Act''):

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the income of Curios House, Virdhichand Pannalal, Virdhichand and Sons and the income earned by Svs Onkarmal and Narainlal unseparated coparceners of the HUF funds were not properties acquired out of HUF funds were not includible as part of the income of the assessee Shri Virdhichand Karta of Virdhichand Pannalal?

Brief facts of the case are that the assessee is a HUF. The ITO required the assessee to show cause as to why income earned by the concerns under the names of Curios House, Virdhichand Pannalal, Virdhichand & Sons should not be assessed in the hands of the HUF. The ITO after considering the reply of the assessee came to the conclusion that the property income of Shri Onkarmal and Shri Narainlal as well as these concerns belongs to HUF since the investment is from the property acquired out of HUF fund. In appeal before the AAC, notice of one letter which was filed before the ITO was taken wherein it was claimed that no ancestral funds have been used for commencing the business of the firm. The matter of the assessee was considered by this Court in CIT v. Virdhichand & Sons [IT Reference No. 15 of 1981] and Addl. CIT v. Virdhichand Pannalal/Addl. CIT v. Curios House [IT Reference No. 26 of 1978, dated 1-11-1985]. All these references were answered in the affirmative in favour of the assessees against the revenue.

Following the said decisions we are of the opinion that the Tribunal was right in holding that income from Curios House, Virdhichand Pannalal, Virdhichand & Sons and the income earned by Shri Onkarmal and Narainlal, unseparated coparceners of the HUF, from the properties, not acquired out of HUF funds were not includible as part of the income of the assessees Shri Virdhichand Karta of Virdhichand Pannalal. Accordingly, the reference is answered in favour of the assessees and against the revenue.

No order as to costs.