Diversion by overriding title applied where minor sons had an enforceable pre-existing claim to part of partnership income.

A partner's share of income was treated as diverted by overriding title to the extent her minor sons had a pre-existing enforceable entitlement under section 8 of the Hindu Succession Act. The Court distinguished diversion of income at source from a mere application of income after accrual: because the sons had title to part of the share income before it reached the assessee as her own, that portion was not taxable wholly in her hands, and only her real share remained assessable.

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Issues: Whether the assessee's share of partnership income was taxable entirely in her hands or whether, by reason of the statutory entitlement of her minor sons, the income was diverted to them by overriding title.

Analysis: The determining test was whether the amount first became the assessee's income and was later applied for the minors, or whether the minors had a pre-existing title to a part of the share income so that the assessee received it on their behalf. Applying the principle of diversion by overriding title, and treating the minors' entitlement under section 8 of the Hindu Succession Act as creating an enforceable right in a part of the share income, the Court held that the assessee was under an obligation to pass on that part of the income to them. The obligation was one arising from the title to the income itself and was not a mere application of income after accrual.

Conclusion: The share income was not the assessee's income alone; it was liable to be shared with the two minor sons and could not be taxed wholly in the assessee's hands.

Final Conclusion: The reference was answered on the basis that the share income stood diverted in part at source in favour of the minor sons, leaving only the assessee's real share assessable in her hands.

Ratio Decidendi: Where a beneficiary or other person has a pre-existing enforceable title to a part of income, the amount is diverted by overriding title before it reaches the recipient as his or her income and is not merely an application of income after accrual.

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