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Assessment of income from a private trust in the hands of the assessee as an individual. Analysis: The High Court of Madhya Pradesh was presented with a reference under section 256(1) of the Income-tax Act, 1961, regarding the assessment of income from a private trust in the hands of the assessee. The material facts revealed that the assessee, assessed as an individual, had received a sum of Rs. 50,000 through partition with his father, subsequently creating a private trust for the benefit of himself, his wife, and minor daughter. The Income-tax Officer initially held that the trust's income was taxable in the hands of the assessee, a decision upheld by the Appellate Assistant Commissioner and further appealed to the Tribunal. The Tribunal's decision was based on the view that the assessee treated the property from partition as his individual property, converting it into trust property, thus invoking sections 62(2) and 64 of the Income-tax Act. The assessee contended that the property belonged to the Hindu undivided family, citing relevant legal precedents. The court referred to the Supreme Court's decision in N. V. Narendranath v. CWT and a Full Bench decision in CIT v. Krishna Kumar to establish that property received on partition belonged to the Hindu undivided family, even if the assessee treated it as individual property. The court distinguished other cases cited by the Revenue, emphasizing that the property in question was part of the Hindu undivided family. Despite the assessee's treatment of the property as individual, the court held that it did not alter the property's nature. Therefore, the income from the private trust could not be taxed in the hands of the assessee as an individual. The court ruled in favor of the assessee, stating that the Tribunal's decision was not justified, and answered the question referred in the negative. The parties were directed to bear their own costs in the reference.
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