Hotchpot transfer of self-acquired shares did not trigger income attribution under the Indian Income-tax Act.

Dividend income from shares unilaterally thrown into the common hotchpot of a Hindu undivided family was not assessable in the individual assessees' hands under section 16(1)(c) or section 16(3)(b) of the Indian Income-tax Act, 1922, because the declarations showed the shares had ceased to be individual property and no right of retransference or reassumption was reserved. On that basis, the tax deducted at source on such dividend income was refundable to the Hindu undivided families, as the income was not includible in the individual assessments.

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Issues: (i) Whether the dividend income from 500 shares thrown into the common hotchpot of the respective Hindu undivided families was assessable in the hands of the individual assessees under section 16(1)(c) or section 16(3)(b) of the Indian Income-tax Act, 1922. (ii) Whether the Hindu undivided families were entitled to refund of tax deducted at source on the dividend income of those shares.

Issue (i): Whether the dividend income from 500 shares thrown into the common hotchpot of the respective Hindu undivided families was assessable in the hands of the individual assessees under section 16(1)(c) or section 16(3)(b) of the Indian Income-tax Act, 1922.

Analysis: The declarations showed that the shares ceased to be the individual property of the assessees and became the property of the respective Hindu undivided families. The income did not arise from assets remaining the property of the settlor or disponer, and the declarations did not reserve any right of retransference or reassumption of power. The unilateral throwing of self-acquired property into the common stock did not amount to a transfer attracting section 16(3)(b).

Conclusion: The dividend income was not assessable in the hands of the individual assessees under section 16(1)(c) or section 16(3)(b).

Issue (ii): Whether the Hindu undivided families were entitled to refund of tax deducted at source on the dividend income of those shares.

Analysis: Once the dividend income was held not to be includible in the assessments of the individual assessees, the tax deducted at source on that income was refundable to the Hindu undivided families.

Conclusion: The Hindu undivided families were entitled to the refund claimed.

Final Conclusion: The reference was answered against the revenue on the taxability issue and in favour of the assessees on refund entitlement, leaving the assessees entitled to costs.

Ratio Decidendi: A unilateral declaration by which a coparcener throws self-acquired property into the common hotchpot of a Hindu joint family is not a settlement or transfer that attracts income attribution under section 16(1)(c) or section 16(3)(b) unless the assets remain the settlor's property or a right of retransfer or reassumption is reserved.

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