Self-acquired property and family partition: absent clear blending, allotment to an adopted son was taxable as a transfer.

A self-acquired property becomes joint family property only on clear and unequivocal evidence of blending or an intention to throw it into the hotchpot. On the facts, the deed merely divided self-acquired assets between the assessee and the adopted son, without any prior conversion into joint family property. The allotment therefore operated as a transfer of self-acquired property, with the minor acquiring an immediate beneficial interest. As a result, the income from the allotted properties was includible in the assessee's total income, the value of those properties was includible in net wealth, and the transfer was chargeable as a gift for tax purposes.

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Issues: (i) whether the assessee's self-acquired properties had been impressed with the character of joint family property so as to support a genuine partition with the adopted son; (ii) whether the income from the properties allotted to the adopted son was includible in the assessee's total income under section 16(3)(a)(iv) of the Income-tax Act, 1922; (iii) whether the value of the allotted properties was includible in the assessee's net wealth under section 4(1)(a)(ii) of the Wealth-tax Act; and (iv) whether the allotment amounted to a gift chargeable under the Gift-tax Act.

Issue (i): whether the assessee's self-acquired properties had been impressed with the character of joint family property so as to support a genuine partition with the adopted son.

Analysis: The properties were admittedly self-acquired and there was no clear declaration, act, or recital showing that they had been blended with joint family property or thrown into the hotchpot. The deed merely evidenced an intention to divide the self-acquired properties between the assessee and the adopted son. The language used did not disclose any prior impressing of the properties with joint family character.

Conclusion: The properties did not become joint family property; the arrangement was not a partition of joint family property.

Issue (ii): whether the income from the properties allotted to the adopted son was includible in the assessee's total income under section 16(3)(a)(iv) of the Income-tax Act, 1922.

Analysis: Since the properties remained the assessee's self-acquired properties until the deed operated, the allotment to the adopted son was treated as a transfer by gift. The clause dealing with the minor's possession and enjoyment did not postpone vesting; it only described the normal functions of a guardian managing a minor's property. The minor obtained an immediate beneficial interest.

Conclusion: The income from the allotted properties was includible in the assessee's total income under section 16(3)(a)(iv) of the Income-tax Act, 1922.

Issue (iii): whether the value of the allotted properties was includible in the assessee's net wealth under section 4(1)(a)(ii) of the Wealth-tax Act.

Analysis: The same reasoning governing the income-tax question applied to the wealth-tax question, because the allotment did not create a true partition of joint family property but operated as a transfer of self-acquired assets to the adopted son.

Conclusion: The value of the allotted properties was includible in the assessee's net wealth under section 4(1)(a)(ii) of the Wealth-tax Act.

Issue (iv): whether the allotment amounted to a gift chargeable under the Gift-tax Act.

Analysis: The deed effected a division of self-acquired property and conferred property on the adopted son without any prior blending into joint family property. That transfer was therefore treated as a gift for fiscal purposes.

Conclusion: The allotment constituted a gift chargeable under the Gift-tax Act.

Final Conclusion: The common deed was treated as a taxable transfer of self-acquired property, and the department's assessments under the income-tax, wealth-tax, and gift-tax provisions were upheld.

Ratio Decidendi: A self-acquired property becomes joint family property only on clear and unequivocal evidence of blending or an intention to throw it into the hotchpot; absent such evidence, a deed allotting the property to another operates as a gift and the resulting income and wealth remain taxable in the transferor's hands where the minor obtains an immediate vested interest.

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