Hindu undivided family funds: only the portion traceable to ancestral money retained exempt character in house investment.

Investment in a house property was examined to determine whether the funds, or income arising from them, were attributable to Hindu undivided family property. The court accepted only part of the assessee's claim: the amount of Rs. 23,137 received under a succession certificate retained its ancestral character in the assessee's hands vis-a -vis his sons, and accretions from its investment in National Savings Certificates also inherited that character. The assessee's treatment of the amount as individual property did not change its legal nature. Accordingly, only the proportion of the house investment traceable to that amount was treated as HUF property and exempt, while the balance of the claim was not proved.

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Issues: Whether the investment in the house property and the income arising therefrom were attributable, in whole or in part, to Hindu undivided family funds so as to be exempt in the assessee's hands.

Analysis: The claim that the entire amount used in the acquisition of the house represented Hindu undivided family funds was not accepted in full. The Court held that the amount of Rs. 23,137 received under the succession certificate retained its character as ancestral property in the hands of the assessee qua his sons, and when invested in National Savings Certificates, the accretions also took that character. The assessee's treatment of the amount as individual property did not alter its legal character. On that basis, the proportion of the house investment referable to that amount had to be treated as Hindu undivided family property, while the remaining claim was not established on the facts.

Conclusion: The question was answered partly in the assessee's favour, and only the income proportionate to the investment traceable to Rs. 23,137 was held liable to exemption from income-tax in the assessee's hands.

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