1982 (6) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Revenue was legally entitled to take a different view regarding the assessee's 1/2 share of 31% in the firm despite earlier acceptance.
2. Whether the will created any overriding title in relation to the said 1/2 share of 31% in the firm.
3. Whether the Tribunal exceeded its jurisdiction in holding that the assignment of 50% of her share to the trust was in furtherance of the obligation created by the will.
4. Whether the finding of the Tribunal that the moral obligation arising under the will was converted into a legal obligation by the declaration is vitiated for want of evidence.
5. Whether the declaration was made in furtherance of the obligation created by the will and not two different aspects.
6. Whether the assignment of 50% share in the profit of the firm was in pursuance of the obligation arising under the will and whether the assessee was entitled to deduction of 50% in respect of the 31% share.

Detailed Analysis:

Issue 1: Revenue's Change of View
The court did not find it necessary to answer this question. However, it was assumed that the principle of res judicata does not apply, meaning the Revenue could take a different view.

Issue 2: Overriding Title by Will
The court answered this question in the negative, against the Revenue. It was established that the will created a legal obligation, not just a moral one, for the assessee to distribute 50% of the income from the 31% share to the four daughters. This obligation was enforceable in a court of law, thus creating an overriding title in favor of the daughters.

Issue 3: Tribunal's Jurisdiction
The court did not find it necessary to answer this question. The focus was on the merits of the case rather than procedural jurisdiction issues.

Issue 4: Conversion of Moral to Legal Obligation
The court answered this question in the affirmative, in favor of the assessee. It was held that the declaration of 7th December, 1966, did convert the moral obligation under the will into a legal obligation, thus justifying the deduction of 50% from the 31% share in the profits.

Issue 5: Declaration and Will's Obligation
The court answered this question in the negative, against the Revenue. It was determined that the declaration of 7th December, 1966, was not merely formalizing the obligation under the will but was a separate act of donation or gift, creating an independent legal obligation.

Issue 6: Assignment of 50% Share
The court answered this question in the negative, against the Revenue. It was concluded that the assignment of 50% share in the profits to the trust was a separate act and not merely a fulfillment of the will's obligation. The assessee was entitled to the deduction of 50% in respect of the 31% share in the partnership.

Conclusion:
The court found that the will of Narottamdas created a legal obligation for the assessee to distribute 50% of the income from the 31% share to the daughters. The subsequent declaration of 7th December, 1966, was a separate act of donation, creating an independent legal obligation. The Tribunal's view was not upheld, and the court ruled in favor of the assessee on the key issues. The reference was answered accordingly with costs.