1983 (12) TMI 83 - AT - Income Tax

Summary

Issues:
- Interpretation of section 6 of the Married Women's Property Act, 1874 regarding insurance policies.
- Taxability of interest income earned by wives on policies financed by HUF funds.
- Applicability of section 64 of the Income-tax Act, 1961 in the case of HUF.

Analysis:
1. The appeal concerned the assessment year 1981-82 and was linked to a similar appeal involving another individual. The dispute revolved around insurance policies taken by the husbands of the two ladies under the Married Women's Property Act, with the premiums financed from the HUF funds. The wives earned interest income on these policies, leading to a disagreement over the taxability of this income.

2. The policies were taken under section 6 of the Married Women's Property Act, creating a trust for the benefit of the wives. The revenue contended that the interest income should be taxed in the hands of the wives, as per the provisions of the Act. The departmental representative argued that section 6 of the Act prevails in such cases, and the income rightfully belongs to the wives, not the HUF or husbands.

3. The wives' position was that since the policies were financed by the HUF funds, the income should be attributed to the HUFs, not them individually. However, the tribunal analyzed the relevant legal provisions, including section 6 of the Married Women's Property Act, and concluded that the income belongs to the wives as per the trust created under the Act.

4. The tribunal highlighted the absence of deeming provisions in section 64 of the Income-tax Act, which could attribute the interest income to the HUF. It distinguished a previous case involving an individual financing a policy under the Act, emphasizing that in the present scenario involving HUF funds, the income rightfully pertains to the wives. Consequently, the tribunal reversed the order of the AAC and upheld the revenue's appeal.

5. In conclusion, the tribunal allowed the revenue's appeal, ruling in favor of taxing the interest income earned by the wives on policies financed by HUF funds in their individual capacity, as per the provisions of the Married Women's Property Act and the Income-tax Act.