1968 (11) TMI 35 - HC - Income Tax

Estate Duty - properties derived from the father of the deceased under the will - properties had obtained the character of joint family properties of the deceased and his four sons on the date of the death of the deceased - inclusion of these properties in the estate of the deceased as his individual property is not correct

Issues Involved:
1. Determination of the nature of properties derived under a will.
2. Interpretation of the will's clauses regarding property inheritance.
3. Assessment of whether the properties were individual or joint family properties.
4. Evaluation of subsequent conduct and declarations by the deceased regarding property status.
5. Analysis of income-tax returns and their implications on property status.
6. Examination of sale deeds and investments to infer property character.
7. Consideration of legal precedents and principles regarding property blending and hotchpot.

Issue-wise Detailed Analysis:

1. Determination of the nature of properties derived under a will:
The primary question referred for decision was whether the properties derived by the deceased from his father, as per the will dated February 21, 1896, were correctly included in the estate of the deceased as his individual property. The Assistant Controller of Estate Duty had determined that the properties described in the will as self-acquisitions were inherited by the deceased in his individual capacity.

2. Interpretation of the will's clauses regarding property inheritance:
The will executed by the deceased's adoptive father, dated February 21, 1896, contained clauses (12 and 13) indicating the testator's intention to vest the estate absolutely in the deceased. The will specified that certain properties were self-acquired and intended to be bequeathed to the deceased individually. The court agreed with the Central Board of Direct Taxes that the testator intended to dispose of his properties, including both those received on partition and self-acquired, in a particular manner.

3. Assessment of whether the properties were individual or joint family properties:
The applicant contended that the properties were joint family properties and that the deceased had only a 1/5th interest in them. The Board, however, found no convincing evidence that the deceased had relinquished his separate rights over the properties in favor of the family. The court noted that the will indicated an intention to confer an absolute interest on the deceased in the self-acquired properties of his father.

4. Evaluation of subsequent conduct and declarations by the deceased regarding property status:
The applicant argued that the deceased's conduct, such as declaring his status as Hindu undivided family in income-tax returns and including his sons in sale deeds, indicated an intention to treat the properties as joint family properties. The Board, however, did not consider these declarations conclusive evidence of the deceased's status.

5. Analysis of income-tax returns and their implications on property status:
The court noted that the deceased had declared himself as manager of the Hindu undivided family in income-tax returns since 1938-39, but assessments were made on him as an individual up to 1947-48. The court disagreed with the Board's finding that these declarations were not conclusive, emphasizing that the deceased was assessed as a Hindu undivided family after 1947-48, indicating an intention to treat the properties as joint family properties.

6. Examination of sale deeds and investments to infer property character:
The court examined various sale deeds and investments made by the deceased. It found that the deceased had described the properties as ancestral in some sale deeds and included his sons as parties or witnesses. These actions supported the applicant's contention that the properties were treated as joint family properties.

7. Consideration of legal precedents and principles regarding property blending and hotchpot:
The court referred to the Supreme Court's decision in Arunachala Mudaliar v. Muruganatha Mudaliar, which emphasized the importance of the donor's or testator's intention. The court also cited Commissioner of Income-tax v. M. K. Stremann, where it was held that even giving instructions to a lawyer to draft a declaration to blend self-acquired properties with joint family properties would suffice. The court concluded that the deceased had expressed an unequivocal intention to throw all his properties into the hotchpot, supported by his declarations in income-tax returns and the assessment by income-tax authorities.

Conclusion:
The court concluded that the properties derived from the father of the deceased under the will had obtained the character of joint family properties of the deceased and his four sons on the date of the death of the deceased. Therefore, the inclusion of these properties in the estate of the deceased as his individual property was not correct. The question was answered in the negative, in favor of the assessee, with costs awarded to the applicant.

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