In P.G Sunandamma v. ITO, the ITAT, Bangalore, held that the transfer of excise license to a member of HUF on death of Karta cannot be reason to assess HUF’s income in the hands of that individual member.
While allowing the appeal filed by the assessee, the bench clarified that the transfer of license to the member after the death of Karta under the law of succession cannot be a treated as “transfer” as held by the Apex Court in cases Biharilal Jaiswal Vs. CIT and CIT Vs. Rangila Ram & Others.
Assessee is a member of HUF consists of her husband, and four sons. Assesses’ husband, Mr. Govindaswamy, was the proprietor of M/s Five Star Liquor Shop. He was running another proprietorship concern namely, M/s. Pisale Wines which belongs to the HUF. On death of husband, the assessee was allocated these licenses by the Excise Department by virtue of the law of succession. The status of P.V. Govindaswamy was not disputed being Karta of HUF then there is no impediment in succession of the assessee as a Karta of HUF.
AO completed assessment against assessee by treating the income from liquor business standing in the name of M/s. Pisale Wines admitted in the hand of HUF as individual income of the assessee. He, while doing so, relied on the Apex Court decisions in Biharilal Jaiswal Vs. CIT and CIT Vs. Rangila Ram & Others wherein the Court held that a license issued in the name of individual cannot be transferred to a partnership firm and therefore the income from business of liquor has to be assessed in the hand of the individual who is license holder.
Before the Tribunal, the department contended that the assessee has offered the income as a Karta of HUF however the assessee cannot be a Karta of HUF. Therefore the income from the business of retail trading in liquor has to be assessed in the individual hand of the assessee.
The bench noted that the license was transferred to assessee, on death of her husband, with the consent of the other family members. It is also undisputed fact that during his lifetime Shri P. V. Govindaswamy was assessed to tax in two statuses i.e. individual being proprietor as well as HUF being Karta of HUF. Thus on the death of the husband of assessee, the assessee acquired these licenses as a successor and legal heir of Sri P.V. Govindaswamy. The bench observed that there is no transfer of the license by the holder but the license in the name of the late husband of the assessee was transferred in the name of the assessee by the authorities because of the law of succession and it was not the transfer by the holder itself. It was, therefore, held that the income offered in the hand of the HUF cannot be assessed in the hand of the individual-assessee.
Read the full text of the Order below.
