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TMI Blog1970 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the assessee firm credited interest in the account standing in the name of Vrajlal Trikamlal and such interest was shown by Mulchand Trikamlal in his personal assessment and it was taxed as his personal income on the footing that the credit balance in the account of Vrajlal Trikamlal belonged to him as his separate property. The assessee-firm also on the same footing treated interest credited in the account of Vrajlal Trikamlal as interest paid to Mulchand Trikamlal and such interest was disallowed as an impermissible deduction in the assessment of the assessee-firm on the ground that it represented interest paid to a partner. This state of affairs continued up to the assessment year 1956-57. Even for the assessment year 1957-58, Mulchand Trikamlal had filed his return on the same basis, but before the assessment could be completed, he addressed a letter dated 18th October, 1957, to the Income-tax Officer submitting a revised return showing interest credited in the account of Vrajlal Trikamlal as income belonging to the Hindu undivided family of himself and his two sons. He pointed out that he had made a mistake in showing interest received in the account of Vrajlal Trikamlal as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... footing: the amount of interest credited in the account of Vrajlal Trikamlal was assessed as income of the Hindu undivided family of Mulchand Trikamlal and it was allowed as deductible expenditure in the assessment of the assessee-firm. The Income-tax Officer, however, in the course of assessment of the assessee-firm, for the assessment year 1962-63, once again raised the question whether the credit balance the account of vrajlal Trikamlal was the separate property of Mulchand Trikamlal or belonged to the Hindu undivided family of Mulchand Trikamlal. The assessee-firm, with a view to supporting its contention that the credit balance in the account of Vrajlal Trikamlal belonged to the Hindu undivided family of Mulchand Trikamlal, filed three affidavits dated 30th September, 1963, one of Mulchand Trikamlal and the other two of his two sons. What is stated in these affidavits is rather important and we may, therefore, refer to their material portions. Mulchand Trikamlal stated in his affidavit: "Shree, Vrajlal Trikamlal.....died in 1949, leaving after him our Hindu undivided family as only heir. As such his capital in the said firm at the time of death has become the property of our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of the assessee-firm was the separate property of Mulchand Trikamlal or it belonged to the Hindu undivided family of Mulchand Trikamlal and his two Sons. Now, there can be no doubt that Mulchand Trikamlal having inherited the credit balance standing in the account of Vrajlal Trikamlal as an heir or his brother, Vrajlal Trikamlal, it came to him as his separate property. But the contention of the assessee-firm was that by clear and unequivocal conduct Mulchand Trikamlal had treated the credit balance in the account of Vrajlal Trikamlal as joint family property and thrown it into the common hotchpot of the joint family with the intention of abandoning his separate claims upon it and, therefore, the credit balance, though originally received by him as separate property, was impressed with the character of joint family property and was property, belonging to the Hindu undivided family during the year of account. There were three acts of Mulchand Trikamlal on which reliance was placed on behalf of the assessee-firm in support of this contention: (1) letters dated 18th October, 1957, and 25th October, 1958, and the declaration dated 31st October, 1958; (2) filing of returns from 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As a matter of fact, right from the time of the death of Vrajlal Trikamlal up to the assessment year 1956-57, the credit balance was treated by Mulchand Trikamlal as his separate property and interest paid on it by the assessee-firm was shown by him in his personal assessment. It was only in the course of assessment for the assessment year 1957-58 that Mulchand Trikamlal for the first time claimed that the credit balance was prperty belonging to his Hindu undivided family. It is true that, thereafter, Mulchand Trikamlal treated the credit balance as joint family property by filing returns showing inetest paid on the credit balance by the assessee-firm as income belonging to his Hindu undivided family. But it is apparent from the letter dated 18th October, 1957, and the declaration dated 31st October, 1963, made by Mulchand Trikamlal and his two sons that the credit balance was treated by Mulchand Trikamlal as joint family property, because be believed that on the death of Vrajlal Trikamal it was inherited by him and his two sons as members of a joint family. This belief entertained by Mulchand Trikamlal was clearly erroneous, since the credit balance was inherited only by him and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the joint family throwing his separate property into the common hotchpot knows that it is his separate property and by his own volition and intention, he waives and surrenders his separate rights in it as separate property. Now, how can he have the intention of abandoning his separate claim in the property unless he knows that it is his separate property ? How can he voluntarily and intentionally waive or surrender his separate rights in the property as separate property unless he is conscious that it is his separate property ? The doctrine of blending, therefore, clearly requires that the property which is said to be impressed with the character of joint family property is separate property of a member of the joint family and he knows it to be his separate property and with full knowledge of that fact he voluntarily throws it into the common stock with the intention of abandoning his separate claim upon it. This essential element in the doctrine of blending was absent in the present case when Mulchand Trikamlal addressed the letter dated 18th October, 1957, made the declaration dated 31st October, 1958, and filed returns of income for the assessment years 1957-58 to 1961-62. Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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