Family arrangement property retained ancestral character, so assessability remained with Hindu undivided family, not individual.

Property received under a family arrangement was examined for its tax character by reference to the underlying Hindu law title. The arrangement was not treated as a reunion reviving the earlier joint family, but the assets allotted to the assessee retained their pre-existing ancestral or joint family character because that title formed the basis of the compromise and the property was pooled and reallocated in substitution of it. Restrictions on disposition did not change that character. On that footing, the assessee was assessable in the status of a Hindu undivided family, not as an individual.

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Issues: Whether the assessee, in respect of properties received under the family arrangement, was assessable in the status of an individual or as a Hindu undivided family.

Analysis: The dispute turned on the legal effect of the family arrangement of 26 March 1942. The arrangement was not a valid reunion in the sense of Hindu law so as to revive the earlier joint family status. However, the property that came to the assessee had an antecedent Hindu undivided family character, because the share received by Chandulal on the earlier partition was ancestral in origin and, on the facts, the assessee had acquired an interest by birth. The family arrangement pooled family property and effected a re-allocation of rights, so the property obtained by the assessee under that arrangement retained the imprint of the pre-existing joint family title. The restrictions on disposition in the arrangement did not alter that character. The assessee also had the benefit of the family property that had been brought into the common pool and, in exchange, received properties under the arrangement; the character of such receipt remained that of joint family property.

Conclusion: The assessee was liable to be assessed as a Hindu undivided family and not as an individual.

Ratio Decidendi: Property allotted under a bona fide family arrangement retains the character of the pre-existing ancestral or joint family title when that title is the basis of the compromise and the property is pooled and reallocated in substitution of such title.

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