Law:

Section:

Section 4 of the Income-tax Act, 1961 - HUF - Assessable as - Assessment years 1960-61 and 1961-62 - Assessee got 75 shares of a company from his grand father who gifted shares in strips to all three sons' family through grand sons - Assessee also got 133 shares from his father - At time of gift assessee was unmarried - Assessee got 452 right shares out of original holdings - He acquired right shares out of dividend received on aforesaid shares - He had been showing dividend income in his individual status - However, after marriage on begetting a son he returned income from shares in status of HUF - Besides affidavit of father was also to effect that gift was to joint family of donee and not for his separate and exclusive enjoyment - Whether, in aforesaid circumstances, dividend income from entire 660 shares was to be assessed in hands of assessee's HUF - Held, yes FACTS The assessee's grand father had three sons and seven grand sons. The grand father gave gifts of shares of company in such way that each sons' family got equal amount of shares. The assessee got 75 shares as gift. The assessee's father also gave a gift of 133 shares of company to the assessee and his brothers. The original shareholding of the assessee thus became 208 shares. The assessee was allotted by the company from time to time rights shares aggregating 452 in all. The entire allotment money for these 452 shares were paid by the assessee out of the dividends on the original holding of 208 shares. At the time of gift the assessee was unmarried. He used to show the dividend on the shares and the interest on the accumulated dividends deposited with the company, in his individual returns till the birth of his son. On the birth of his son, the HUF consisting of the assessee and his minor son, filed a separate income-tax return for the assessment showing the dividend income from 660 shares and interest on the said accumulated deposits. The contention of the assessee was that 208 shares had been gifted not to him personally, but to him as representing his branch and that the dividend income on those shares and the interest income on those deposits belonged to the HUF and was to be taxed in its…

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