Inherited property income assessed as Hindu undivided family income, not individual income.

The court determined that the income from properties inherited by the assessee on the death of his mother should be assessed in the hands of the Hindu undivided family and not as his individual income for the year 1975-76. The settlement deed indicated the benefit was intended for the sons and their heirs, supporting the view that the income should be treated as Hindu undivided family income. The court ruled in favor of the assessee, rejecting the Revenue's argument and directing that the income should not be included in the individual assessment.

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Issues:
1. Whether the income from properties inherited by the assessee on the death of his mother should be included in his individual assessment for the year 1975-76.

Detailed Analysis:
The case involved a tax reference under section 256(1) of the Income-tax Act, 1961, where the Revenue questioned the inclusion of income from certain properties in the individual assessment of the assessee for the year 1975-76. The dispute arose as the assessee claimed that the income belonged to him as a Hindu undivided family and should not be included in his individual assessment. The Income-tax Officer included the income in the individual assessment, but the Appellate Assistant Commissioner and the Tribunal ruled in favor of the assessee, leading to the reference question. The properties in question were inherited by the assessee on the death of his mother, and the core issue was whether this income should be considered individual income or income of the Hindu undivided family.

The factual background revealed that the properties were part of a settlement deed executed by the father of the assessee, which provided for the division of properties among family members. The settlement deed specified that if the wife of the father did not sell or dispose of certain properties during her lifetime, they would be divided among the three sons equally. The settlement deed used the term "heirs" in a manner that indicated the benefit was intended for the sons and their heirs, signifying a class of beneficiaries along with the sons. The court interpreted the settlement deed to conclude that the income from the properties should be assessed in the hands of the Hindu undivided family of the assessee and not as his individual income. The court disagreed with the Revenue's argument that the term "heirs" indicated only an alienable and heritable estate, emphasizing that the settlor intended the benefit for the sons and their heirs, strengthening the view that the income should be treated as Hindu undivided family income.

The court clarified that the settlement deed did not provide for the assessee alone to benefit exclusively from the income but rather intended for the benefit of the assessee, his heirs, and his branch of the family. While the court did not fully agree with the Tribunal's reasoning on the ancestral character of the properties, it upheld the Tribunal's decision that the income from the inherited properties should not be included in the individual assessment of the assessee for the year 1975-76. Ultimately, the court answered the reference question in the affirmative, ruling against the Revenue and directing that there would be no order as to costs.

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