1977 (11) TMI 26 - HC - Income Tax

Summary

Issues Involved:
1. Whether the income from the firm of Messrs. Teju Kaya & Co. pertaining to the share of Shri Khimji Teju Kaya was the individual income of Shri Khimji or the income of a Hindu undivided family (HUF) of which Shri Khimji Teju Kaya was the karta.
2. The genuineness and legal implications of the will dated September 4, 1927.
3. Whether the assessee's conduct in filing returns as HUF constituted estoppel.
4. Whether the property was thrown into the HUF hotchpotch.

Issue-wise Detailed Analysis:

1. Individual Income vs. HUF Income:
The primary issue was whether the income from the firm of Messrs. Teju Kaya & Co. should be assessed as the individual income of Shri Khimji Teju Kaya or as the income of the HUF of which he was the karta. The Tribunal concluded that the share income from the firm was the separate property of Khimji and the joint family had no title or interest in that property. This conclusion was based on the interpretation of the will of Rao Saheb Teju Kaya, which indicated that Khimji was intended to benefit individually.

2. Genuineness and Legal Implications of the Will:
The Tribunal found that the will dated September 4, 1927, was genuine and that the concerned parties were not aware of its existence when the earlier returns were filed. The Tribunal held that the will did not require probate to be effective. The Tribunal's interpretation of the will, in light of the Supreme Court's decision in Arunachala Mudaliar v. Muruganatha Mudaliar, was that the testator intended to confer the property to Khimji exclusively for his benefit and not as part of a scheme to benefit the family or any other member.

3. Estoppel:
The Tribunal rejected the revenue's argument that the assessee was estopped from claiming the income as individual income after initially filing returns as HUF. The Tribunal reasoned that estoppel could not apply because the assessee was unaware of the will's existence and its legal implications when the initial returns were filed. The conduct of the assessee, in ignorance of the will, did not constitute estoppel.

4. Throwing Property into HUF Hotchpotch:
The Tribunal also rejected the argument that Khimji had thrown his share into the HUF hotchpotch. The Tribunal noted that a clear intention to waive separate rights must be established, which was not the case here. Since Khimji was unaware of the will, there was no intention to treat the property as HUF property. The Tribunal emphasized that the intention to waive separate rights and treat property as HUF property could not be lightly inferred.

Conclusion:
The High Court upheld the Tribunal's findings and answered the reference question in favor of the assessee. The court concluded that the income from the firm of Messrs. Teju Kaya & Co. belonged to Khimji in his individual capacity and not as representing the HUF. The Commissioner was directed to pay the costs of the reference to the assessee.