CIT v Girdhari Lal
Rule established
Compensation received on compulsory acquisition of agricultural land is not 'income' under the Income Tax Act.
Facts
- A Hindu Undivided Family (HUF) had accumulated income and properties over several years
- A partition of the HUF took place; the karta received his share of the accumulated assets including cash
- The CIT sought to assess the accumulated income in the karta's hands as his individual income post-partition
- The karta argued the income was of the HUF, already assessed or assessable as HUF income
Issues
- Whether HUF income retains its character after partition
- Whether the karta can be individually assessed on accumulated HUF income received on partition
Held
- Income earned by the HUF is assessed as HUF income in the year it accrues; partition does not create a fresh charge
- On partition, what each co-parcener receives is his share of already-earned (and ideally already-assessed) income
- No fresh income arises on partition; it is merely a division of existing property
- The karta cannot be individually assessed on what was HUF income
Ratio Decidendi
The taxable event is the earning of income, not its distribution on partition. Income wears the status of the person who earns it. An HUF's income is assessed as HUF income when earned. Partition divides assets; it does not generate new taxable income or change the status under which it was originally assessable.
How to use it in an exam
- Cite in Tax Law questions on HUF assessment, partition, and status of assessees
- Relevant for Hindu Law questions on the effect of partition on coparcenary property
- Use in discussions on the distinction between division of property and generation of income
Source
Source: AIR 1961 Supreme Court 1124
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.
Cited in study notes
taxation-lawDefinition of IncomeCompensation received on compulsory acquisition of agricultural land is not 'inc