1965 (9) TMI 3 - HC - Income Tax

Gift of self-acquired property by father to his sons - whether the sons take the property as Individuals or as Kartas of their respective HUF - held that income therefrom should be assessed as that of an individual

Summary

Issues:
Character of rental income received by each assessee for the assessment year 1960-61.

Analysis:
The judgment revolves around determining whether the rental income received by the assessees pertains to the income of their Hindu undivided families or is individually owned. The assessees were allotted houses by their father through a deed dated July 12, 1959. The Tribunal agreed with the revenue that the rental income from these houses constituted the individual income of each assessee. The key question was whether the property obtained by the sons was individually and exclusively for themselves or as kartas of their Hindu undivided families. The court emphasized that the intention of the father, as expressed in the deed, was crucial in determining the character of the income. The document specified that each son must take the house, receive the income, and enjoy the property, indicating an absolute and exclusive allocation to each son.

The court referred to the Supreme Court's decision, emphasizing that a Mitakshara father has complete powers of disposition over his self-acquired property. The father could either treat his property as ancestral and allot it in a partition-like manner or make individual gifts at his discretion. The court highlighted that the intention of the father, as reflected in the language of the deed, was paramount in determining the nature of the disposition. In this case, the court found no indication in the deed that the father intended the property to be ancestral or part of a partition scheme. The provision for pre-emption was viewed as granting sons the right of alienation, not limiting their powers, further supporting the individual ownership interpretation.

The court concluded that the father's intention, as evidenced by the language of the deed, was to provide each son with an absolute and exclusive property right, not as ancestral property. The equal value of the houses allotted to each son and the father was seen as a gesture of fairness, not indicative of ancestral property. Therefore, the Tribunal's decision regarding the character of the rental income in the hands of the assessees was upheld. The court ruled against the assessees and awarded costs, emphasizing the importance of interpreting the intention behind legal documents in determining property rights.