Goa community of assets and Section 5A: only half of fixed-deposit interest is assessable in one spouse's hands.

Under the Goa community of assets regime, interest from fixed deposits standing in one spouse's name is not automatically assessable entirely in that spouse's hands. Section 5A of the Income-tax Act applies so that income from assets governed by Portuguese family law is assessed by reference to the spouses' substantive ownership; here, only 50% of the interest was taxable in the assessee's hands. Deduction of tax at source on the full interest did not change the underlying ownership position, and Section 283 was treated as inapplicable.

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Issues: Whether, in view of Section 5A of the Income-tax Act, 1961 and the community of assets regime applicable in Goa, only 50% of the interest income from fixed deposits standing in the assessee's name could be assessed in her hands.

Analysis: The CIT(A) and the Tribunal found that the assessee and her deceased husband were governed by the community of assets system under Portuguese family law as applied in Goa. On the husband's death, his interest in the fixed deposits was held to devolve on the legal successors, while the assessee retained only her own 50% share. Section 5A, introduced with retrospective effect, was treated as governing the manner of assessment, and the Tribunal also held that the bank's deduction of tax at source on the entire interest did not alter the substantive ownership of the income. The Court found no merit in the revenue's reliance on Section 283, which was held inapplicable.

Conclusion: The answer was against the revenue and in favour of the assessee; only 50% of the interest income was liable to be assessed in the assessee's hands.

Final Conclusion: The appeal failed, and the assessment made by the revenue was not disturbed.

Ratio Decidendi: Where spouses are governed by the Goa community of assets regime, income from jointly held assets must be assessed in accordance with Section 5A of the Income-tax Act, 1961 and not merely on the basis of the asset standing in one spouse's name.

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