Married Women's Property Act trust proceeds held taxable in the wife's hands, not the husband's HUF, despite HUF-funded premiums.

Section 6 of the Married Women's Property Act, 1874 creates a statutory trust in favour of the wife or wife and children when a married man effects a policy on his own life for their benefit, so the policy proceeds do not form part of the husband's estate. On that basis, interest income from sums received under such policies was treated as belonging to the beneficiary wife, and payment of premiums from HUF funds did not alter ownership or shift the income to the husband's HUF. Section 64 of the Income-tax Act, 1961 was held inapplicable because it contained no deeming fiction to tax the income in the HUF's hands.

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Issues: Whether interest income arising from sums received under life insurance policies taken under section 6 of the Married Women's Property Act, 1874, but financed from HUF funds, was taxable in the hands of the wife or in the hands of the husband's HUF, and whether section 64 of the Income-tax Act, 1961 applied to bring such income into the HUF assessment.

Analysis: Section 6 of the Married Women's Property Act, 1874 creates a trust in favour of the wife or wife and children when a married man effects a policy on his own life for their benefit, and the policy amount does not form part of the husband's estate. On that footing, the sums received under such policies belonged to the beneficiary wife and could not revert to the husband or his HUF merely because the premium had been paid out of HUF funds. The Tribunal also held that section 64 of the Income-tax Act, 1961 contained no deeming fiction that would transfer the interest income to the HUF of the husband in these facts.

Conclusion: The interest income was not assessable in the hands of the husband's HUF, and the revenue's contention was accepted.

Final Conclusion: The appellate order of the AAC was reversed and the assessment made by the Income-tax Officer was restored, with the revenue's appeal allowed.

Ratio Decidendi: A policy taken under section 6 of the Married Women's Property Act, 1874 vests the proceeds in the wife as a statutory trust, and payment of premium from HUF funds does not alter that ownership or attract section 64 of the Income-tax Act, 1961 to tax the income in the husband's HUF.

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