Family income remains assessable when property enjoyment is only an application of income, not diversion by overriding title.

Family property placed in the possession and enjoyment of junior members under a family karar did not lose its character as joint family property, because there was no absolute and irrevocable divestment of the family's rights. The members in possession held the properties only for maintenance and enjoyment subject to continuing family obligations and residual control of the karnavan. Income from the properties was not diverted at source by an overriding title; it was merely applied in discharge of a family obligation. The income therefore remained the income of the Hindu undivided family and was rightly assessable as its agricultural income.

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Issues: Whether the income from properties placed in the possession and enjoyment of junior family members under the family karar remained the income of the Hindu undivided family and was therefore assessable under section 9(1).

Analysis: The arrangement under the karar did not sever the joint status or effect an absolute and irrevocable divestment of the family's rights in the properties. The properties continued to belong to the family, and the members in possession held them only for maintenance and enjoyment subject to the family's continuing obligations and the karnavan's residual control. The income was not diverted at source by an overriding title in favour of the allottees; it was only applied to meet the family's obligation to maintain its members. On the principle distinguishing diversion of income from mere application of income, the receipt was that of the family in law and remained assessable as its agricultural income.

Conclusion: The income in dispute was held to be the income of the family and was rightly included in the taxable agricultural income of the assessee.

Ratio Decidendi: Where family income is merely applied in discharge of a continuing family obligation and is not diverted before receipt by an overriding title, it remains assessable as the income of the family.

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