1959 (5) TMI 59 - HC - Income Tax

Summary

Issues Involved:
1. Ownership of the property at 7, Prithviraj Road.
2. Ownership of the share in profits from the firm Sir Sobha Singh and Company (Builders), Nagpur.
3. Ownership of the salary received from the firm Sir Sobha Singh and Company (Builders), Nagpur.

Issue-wise Detailed Analysis:

1. Ownership of the Property at 7, Prithviraj Road:
The first issue to be addressed was whether the property at 7, Prithviraj Road, valued at Rs. 1,40,000, belonged to S. Bhagwant Singh in his individual capacity. The court examined the circumstances under which the property was allegedly given to S. Bhagwant Singh. A letter from Sir Sobha Singh to the Income-tax Officer stated that the property was given to S. Bhagwant Singh in lieu of services rendered to the family. However, several factors contradicted this claim:
- The family property was distributed among the coparceners by the partition on 31st March 1947, and Sir Sobha Singh had no authority to transfer the property without the consent of the coparceners.
- Under Hindu law, a father cannot gift immovable property except for pious purposes.
- The partition deed did not mention this gift.
- The property was sold for Rs. 6,00,000, but only Rs. 1,40,000 was credited to S. Bhagwant Singh, indicating the gift was of money, not the property itself.

The court concluded that the property did not belong to S. Bhagwant Singh in his individual capacity and answered the question in the negative.

2. Ownership of the Share in Profits from the Firm Sir Sobha Singh and Company (Builders), Nagpur:
The second issue was whether S. Bhagwant Singh's share in the profits from the firm belonged to him in his individual capacity. The court noted that S. Bhagwant Singh sold the Prithviraj Road property for Rs. 6,00,000 and invested Rs. 1,50,000 in the partnership firm. Since the investment was made using joint family funds, the share in the profits could not belong to S. Bhagwant Singh individually. It is settled law that income earned at the expense of joint family property is joint family property. Thus, the court answered this question in favor of the Department, stating that the profits were joint family property.

3. Ownership of the Salary Received from the Firm Sir Sobha Singh and Company (Builders), Nagpur:
The third issue was whether the salary of Rs. 1,500 per month received by S. Bhagwant Singh from the firm was his individual income. The court considered the nature of the salary and the partnership agreement, which stated that S. Bhagwant Singh would devote all his time and attention to the partnership business. The court emphasized the principle that all property acquired by a member of a coparcenary with the aid of joint family property becomes joint family property. Since the investment of joint family funds enabled S. Bhagwant Singh to become a partner and earn the salary, the court concluded that the salary was joint family income. The court found that the income on account of salary was acquired with the aid of joint family property and answered this question in the negative.

Conclusion:
The court answered all three questions in the negative, determining that the property, the share in profits, and the salary were all joint family property and not the individual property of S. Bhagwant Singh. The Department was entitled to the costs of the court, assessed at Rs. 250.