Personal accident insurance proceeds and loan-funded share purchases were held to be individual property, not Hindu undivided family assets.

Compensation under a personal accident-cum-death insurance policy payable only on accidental death did not vest in the insured during life and therefore was treated as the individual property of the recipient, not Hindu undivided family property. Income earned from investing that compensation followed the character of the source and remained the individual income of the assessee. Shares purchased in the names of the karta's wife and minor son with money advanced by the Hindu undivided family were acquired with borrowed funds, creating a debtor-creditor relationship, so the shares were their individual property and the resulting income could not be assessed as Hindu undivided family income.

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Issues: (i) Whether compensation received under a personal accident-cum-death insurance policy on the death of the insured belonged to the assessee in his individual capacity or to the Hindu undivided family; (ii) whether income earned from investment of that compensation took the same character; (iii) whether shares purchased in the names of the karta's wife and minor son with monies advanced by the Hindu undivided family were the individual property of the purchasers or property of the Hindu undivided family.

Issue (i): Whether compensation received under a personal accident-cum-death insurance policy on the death of the insured belonged to the assessee in his individual capacity or to the Hindu undivided family.

Analysis: The policy was treated as a contract in which the right to compensation for accidental death did not vest in the insured during his lifetime. A contract of this nature was distinguished from ordinary life insurance because the event giving rise to liability was uncertain and the claim was unenforceable until the accident-causing death occurred. The amount therefore came into existence only on the insured's death and did not form part of any property belonging to him in his lifetime or pass to the assessee as ancestral property.

Conclusion: The compensation was the individual property of the assessee and not property of the Hindu undivided family.

Issue (ii): Whether income earned from investment of that compensation took the same character.

Analysis: Once the principal compensation amount was held to be the assessee's individual property, the income generated by investment of that amount followed the same legal character. The character of the source controlled the character of the return from that source.

Conclusion: The dividend and interest were the individual income of the assessee and not income of the Hindu undivided family.

Issue (iii): Whether shares purchased in the names of the karta's wife and minor son with monies advanced by the Hindu undivided family were the individual property of the purchasers or property of the Hindu undivided family.

Analysis: The advances from the Hindu undivided family were found to be loans, creating a debtor-creditor relationship and transferring title in the money to the borrowers. The purchasers acquired the shares with their own borrowed monies and later repaid the loans. The use of loan funds, unlike direct use of joint family funds, did not convert the acquired shares into joint family property.

Conclusion: The shares were the individual property of the wife and minor son, and the income therefrom could not be included in the income of the Hindu undivided family.

Final Conclusion: The questions referred were answered in favour of the assessee, and the challenged income and assets were held to be individual in character rather than belonging to the Hindu undivided family.

Ratio Decidendi: A claim under a personal accident insurance policy payable only on accidental death is not property of the insured during life, and monies advanced as loans by a Hindu undivided family become the borrower's property for acquisition purposes, so the resulting assets and income are not necessarily joint family property.

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