1987 (3) TMI 103 - HC - Income Tax

Summary

Issues:
Interpretation of settlement deed for taxation purposes.

Analysis:
The case involved a dispute regarding the tax treatment of rental income received by an assessee from a property known as "Daba Gardens." The assessee claimed that the income should be treated as joint family income, while the tax authorities assessed it as the individual income of the assessee. The primary issue was whether the undivided half interest in the property was settled upon the assessee in his individual capacity or as representing the Hindu undivided family.

The settlement deed executed by the father of the assessee was crucial in determining the nature of ownership of the property and the income derived from it. The deed clearly stated that the undivided half share in the property was settled upon the assessee with absolute right, title, and interest. This indicated that the assessee obtained the property in his individual capacity as the true owner, not on behalf of the Hindu undivided family.

The legal principle established in the case of CIT v. Motors & General Stores emphasized that in revenue matters, the substance of a transaction must be determined based on the legal rights of the parties as reflected in the document. The court held that when the terms of a document are clear and unambiguous, extrinsic evidence cannot be used to alter the meaning of the document. The intention of the parties must be derived from the document itself and the circumstances surrounding its execution.

The court applied the principles of contract interpretation and held that the assessee's ownership of the property and the rental income derived from it were to be treated as his individual income, not as income of the Hindu undivided family. The subsequent affidavit filed by the father and the treatment of the income by the assessee were deemed irrelevant in determining the tax liability. Therefore, the court ruled in favor of the Revenue, stating that the rental income of Rs. 15,000 received by the assessee should be taxed as his individual income and not as the income of the Hindu undivided family.