1966 (2) TMI 14 - HC - Income Tax

Whether the Tribunal was correct in holding the status of the assessee as individual in respect of the income from the business C - held that business Chandmull Rajgarhia was rightly taken to be of the assessee and not of the Hindu undivided family. The first question accordingly is answered in the affirmative

Issues Involved:
1. Status of the assessee as an individual or Hindu undivided family (HUF) in respect of the income from the business "Chandmull Rajgarhia".
2. Whether the utilization of family funds in the individual business constituted blending, transforming the individual business into a joint family business.

Detailed Analysis:

Issue 1: Status of the Assessee
The first issue revolves around whether the income from the business "Chandmull Rajgarhia" should be assessed in the hands of the assessee as an individual or as a Hindu undivided family (HUF). For the assessment years from 1929-30 to 1953-54, the assessee was assessed as an individual. However, for the assessment year 1954-55, the assessee filed a revised return claiming his status as HUF. The Appellate Assistant Commissioner held that the income from all sources except the business "Chandmull Rajgarhia" belonged to the HUF. The assessee's contention that the business was started with joint family funds in 1945 was not accepted by the revenue for the assessment year 1946-47, and this was affirmed by the appellate authorities. The Appellate Tribunal also upheld this decision, leading to the reference to the High Court.

The court observed that an undivided member of a joint Hindu family can acquire and own separate property with his own earnings. The presence of a sufficient nucleus with the joint family raises a presumption of new acquisitions being for the joint family. However, this presumption does not extend to the starting of a new business in the name of an individual member. The court concluded that the business "Chandmull Rajgarhia" was rightly taken to be of the assessee as an individual and not of the HUF. Therefore, the first question was answered in the affirmative.

Issue 2: Blending of Family Funds with Individual Business
The second issue concerns whether the utilization of family funds in the individual business constituted blending, thereby transforming the individual business into a joint family business. The assessee introduced Rs. 1,86,124 into the business on December 4, 1951, after a voluntary disclosure of unassessed cash balance, which included savings from joint family funds and personal earnings. The court noted that for blending to occur, there must be a clear intention to merge the separate income or property into the joint family estate. Mere acts of generosity or inclination to help other family members do not constitute blending.

The court found no evidence of the assessee's intention to abandon his exclusive claim to the business in favor of the joint family before or after the introduction of Rs. 1,86,124 until the end of 1953. The court also referred to several judicial precedents, emphasizing that the intention of blending must be clearly established. The inclusion of Rs. 1,86,124, part of which was from joint family savings, was not enough to conclude that the business became part of the joint family estate. Therefore, the second question was answered in the negative.

Conclusion:
The High Court concluded that the business "Chandmull Rajgarhia" was rightly assessed as the individual property of the assessee and not as part of the HUF. The first question was answered in the affirmative, confirming the individual status of the assessee concerning the business income. The second question was answered in the negative, rejecting the claim that the utilization of family funds constituted blending, transforming the individual business into a joint family business. The department was entitled to a cost of Rs. 250 from the assessee.

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