Compromise decree operates prospectively and cannot retrospectively change property ownership for earlier assessment years.

A compromise decree settling litigation over Ferreira Mansion was treated as operating only from the date of the settlement and not as a declaration of pre-existing title. On the evidence, the Tribunal found that Dr. Ferreira owned the property until the consent decree and that there was no material to treat him as a benamidar for the trust. The later decree therefore could not retrospectively alter ownership or rewrite the position for earlier accounting years, with the result that the earlier income from the property could not be assessed in the assessee's hands on that basis.

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Issues: Whether the consent decree dated 11 April 1960 altered the ownership of Ferreira Mansion retrospectively so as to make the income assessable in the assessee's hands for the relevant earlier accounting years.

Analysis: The Tribunal had found on the evidence that the property belonged to Dr. Ferreira until the consent decree and that there was no material to treat him as a benamidar for the trust. The decree was not treated as a declaration of an existing legal position but as a compromise arrived at between the parties to resolve pending litigation. A settlement of that character could operate only from the date on which it was made and could not rewrite the past or divest the ownership position as it stood before the compromise.

Conclusion: The consent decree had only prospective effect and did not alter the ownership of the property for the earlier assessment years; the question was answered in favour of the assessee.

Final Conclusion: The reference was disposed of by holding that the earlier income from the property could not be brought to tax in the assessee's hands on the basis of the later compromise decree.

Ratio Decidendi: A compromise decree obtained by agreement of parties operates prospectively unless it expressly or necessarily declares an existing legal position, and it cannot retrospectively change ownership for prior assessment periods.

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