1971 (8) TMI 17 - SC - Income Tax

Whether on a proper interpretation of the deed of conveyance and the deed of settlement the Tribunal is right in holding that the house property being premises is not trust property - Income-tax authorities are entitled to look into the surrounding circumstances to find out the reality-Revenue s appeal is allowed

Summary

Issues Involved:
1. Whether the house property at premises Nos. 46A and 46B, Wellesley Street, Calcutta, is trust property.
2. Whether the High Court was justified in directing the Tribunal to state a case and submit the question for its opinion.
3. Whether the Tribunal's finding that the trust was not real was based on evidence.

Issue-wise Detailed Analysis:

1. Whether the house property at premises Nos. 46A and 46B, Wellesley Street, Calcutta, is trust property:
The primary issue revolves around whether the property in question was genuinely trust property or not. The property was purchased by the assessee purportedly as a trustee of a trust created by his wife. The income from this property was assessed as the assessee's income. The assessee contended that the property was trust property and should not be taxed in his hands. The Income-tax Officer, Appellate Assistant Commissioner, and the Tribunal rejected this claim, concluding that the trust was not real and the income should be taxed as the assessee's income. The Tribunal found that the recitals in the trust deed were make-believe statements and the trust did not exist. The High Court, however, opined that the apparent statements in the documents must be presumed to be real until the contrary is established and held that the onus of proving the income was taxable in the hands of the assessee lay on the department, which it failed to discharge.

2. Whether the High Court was justified in directing the Tribunal to state a case and submit the question for its opinion:
The High Court directed the Tribunal to state a case and submit the question for its opinion under section 66(2) of the Indian Income-tax Act, 1922. The Supreme Court found this direction erroneous, stating that the Tribunal did not interpret the documents but merely found itself unable to accept the correctness of some of the recitals. The Tribunal's conclusion was based on the evidence and was within its province. The High Court's interference was deemed unjustified as it misinterpreted the Tribunal's role and findings.

3. Whether the Tribunal's finding that the trust was not real was based on evidence:
The Tribunal is the final fact-finding body, and its findings are conclusive unless proved perverse or unsupported by evidence. The Tribunal found the trust to be unreal based on several factors: the assessee's wife had no independent source of income, the source of the funds used to purchase the property was unexplained, and the assessee's inconsistent behavior regarding the income from the property in previous assessments. The Supreme Court upheld the Tribunal's findings, emphasizing that the Tribunal's conclusion was based on human probabilities and the evidence presented. The High Court's criticism of the Tribunal for not examining the wife and father-in-law of the assessee was dismissed as ignoring practical realities.

Conclusion:
The Supreme Court concluded that no question of law arose from the Tribunal's order, and the High Court's direction to state a case was unjustified. The Tribunal's finding that the trust was not real was based on substantial evidence. The Supreme Court discharged the High Court's answer and answered the question in favor of the department, allowing the appeal and imposing costs on the assessee.