Separate income presumption in new business profits held to apply absent clear blending with joint family property.

A new cloth business started without joint family funds, family labour, or participation by other family members was presumptively the separate income of the person who carried it on. Mere crediting of profits to an individual capital account in family books did not, by itself, displace that presumption, because blending of separate property depends on the owner's intention to treat it as joint family property. On the facts accepted, there was no clear evidence to rebut separate ownership, so the profits from the cloth transaction were not assessable as Hindu undivided family income.

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Issues: Whether the profits from the cloth transaction under the contract dated 3 December 1958 were assessable as the income of the Hindu undivided family or as the separate income of the assessee.

Analysis: The assessee carried on the cloth business on his own, no family funds were used, no other member of the family took part in the business, and the business was a new venture rather than an ancestral trade. In such circumstances, the normal presumption under Hindu law was that the business and its profits belonged to the assessee individually. The mere crediting of the profit to the individual capital account in the family books was not conclusive against that presumption, and blending of separate property depends on the intention of the acquirer, not on the bookkeeping entry alone. On the materials accepted by the Tribunal, there was nothing sufficient to displace the presumption in favour of separate ownership.

Conclusion: The profit from the cloth transaction was not the income of the Hindu undivided family, and the Tribunal was not justified in law in treating it as such.

Ratio Decidendi: Where a new business is started without use of joint family funds or family labour, the profits are presumptively the separate income of the person who carried on the business unless there is clear evidence of an intention to blend the assets with joint family property.

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