1984 (12) TMI 48 - HC - Wealth-tax

Summary

Issues: Interpretation of a will regarding bequests made to grandchildren, determination of status as "Hindu undivided family" for taxation purposes, subsequent conduct of parties affecting interpretation of will.

Analysis:
The judgment of the court dealt with a common question of law under the Income-tax Act and the Wealth-tax Act concerning the interpretation of a will executed by a testator bequeathing a business to his three grandchildren. The issue arose when the grandchildren claimed their correct status as a "Hindu undivided family" for the assessment year 1976-77, contrary to their previous filings as individuals for the years 1959-60 to 1975-76. The key contention was whether the bequests under the will were intended for the joint families of the grandchildren or for the individuals themselves.

The Appellate Assistant Commissioner initially accepted the assessee's claim that the bequests were meant for the benefit of the joint families, leading to appeals before the Income-tax Appellate Tribunal. The Tribunal upheld the view that the bequests were for the joint families, citing certain legal precedents. However, the High Court disagreed with this interpretation. The court analyzed the language of the will and found no indication that the testator intended to benefit the joint families of the grandchildren. The court emphasized the unequivocal recitals in the will, stating that the grandchildren were to inherit the business with equal and absolute rights as individuals after the testator's lifetime.

Furthermore, the court rejected the relevance of subsequent conduct of the parties in determining the true legal effect of the will. It highlighted that the understanding of the assessees themselves, who initially filed returns as individuals, did not support the later claim of being assessed as a Hindu undivided family. The court concluded that the grandchildren were not liable to be assessed as a Hindu undivided family for taxation purposes related to the business bequeathed by the testator. The judgment favored the Revenue and dismissed the claim of the assessees.

In the final part of the judgment, the court rejected an oral application for leave to appeal to the Supreme Court, deeming it unfit for granting leave. The decision provided a comprehensive analysis of the legal issues surrounding the interpretation of the will and the determination of the assessee's status for taxation, ultimately ruling in favor of the Revenue based on the specific language and intent of the testator's will.