1978 (2) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Whether the declaration made by the assessee on 18th June 1955 was genuine and fully acted upon.
2. Whether the assessee had thrown all his self-acquired properties into the common hotchpot of the Hindu Undivided Family (HUF) and was not the sole owner of the assets.

Detailed Analysis:

Issue 1: Whether the declaration made by the assessee on 18th June 1955 was genuine and fully acted upon.

The court examined the genuineness of the declaration made by the assessee on 18th June 1955. The Tribunal had accepted the declaration as a genuine document, noting that the original Notarial Certificate and Notarial seals were produced. The Tribunal found that the assessee had referred to this declaration as early as in his letter dated 6th March 1961 to the ITO. Moreover, the Tribunal observed that the assessee, his wife, and his sons were parties in an arbitration agreement filed in Suit No. 500 of 1960, which supported the claim that the assets were held jointly.

The revenue contended that the declaration was bogus and not drawn up on 18th June 1955, arguing that it was not brought to light during the assessment for the year 1952-53. However, the Tribunal found sufficient evidence to the contrary, including the exclusion of income from the assets stated to have been divided among the family members.

The court concluded that the Tribunal's finding that the declaration was genuine was neither unreasonable nor perverse. The document was admitted as genuine, although some recitals were found to be factually incorrect. Therefore, the court answered question No. 1 in the negative, in favor of the assessee.

Issue 2: Whether the assessee had thrown all his self-acquired properties into the common hotchpot of the HUF and was not the sole owner of the assets.

The court analyzed the legal effect of the declaration dated 18th June 1955. The Tribunal had held that the declaration established that the assessee had thrown his self-acquired properties into the common hotchpot of the HUF, consisting of himself, his wife, and his sons. The Tribunal noted that the shares of the companies were allotted to the family members in a partial partition, while other assets continued to be joint family property.

The revenue argued that the declaration did not record the transfer of individual properties to the joint family hotchpot and lacked any overt act or unequivocal declaration converting self-acquired property into joint family property. However, the court found that the operative part of the declaration unequivocally stated that the properties and assets belonged to the joint family and had been divided among the family members.

The court cited several precedents supporting the view that no pre-existing nucleus of joint family property is necessary for self-acquired property to be thrown into the hotchpot. The court referenced the decisions in R. Subramania Iyer v. CIT and CIT v. M. K. Stremann, affirming that the declaration and overt acts of the assessee were sufficient to impress the properties with the character of joint family property.

Consequently, the court answered question No. 2 in the affirmative, in favor of the assessee, holding that the assessee had indeed thrown his self-acquired properties into the common hotchpot of the HUF and was not the sole owner of the assets.

Conclusion:
The court concluded that the declaration made by the assessee on 18th June 1955 was genuine and fully acted upon. It also held that the assessee had thrown all his self-acquired properties into the common hotchpot of the HUF, thus not being the sole owner of the assets. Both questions were answered in favor of the assessee.