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TMI Blog1970 (9) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... inherited the properties left by him as his only heir. On the death of Vrajlal Trikamlal, Mulchand Trikamlal was admitted as a partner in the assessee-firm but the credit balance in the account of Vrajlal Trikamlal in the books of account of the assessee-firm continued to stand in the same name. Every year, the assessee firm credited interest in the account standing in the name of Vrajlal Trikamlal and such interest was shown by Mulchand Trikamlal in his personal assessment and it was taxed as his personal income on the footing that the credit balance in the account of Vrajlal Trikamlal belonged to him as his separate property. The assessee-firm also on the same footing treated interest credited in the account of Vrajlal Trikamlal as interest paid to Mulchand Trikamlal and such interest was disallowed as an impermissible deduction in the assessment of the assessee-firm on the ground that it represented interest paid to a partner. This state of affairs continued up to the assessment year 1956-57. Even for the assessment year 1957-58, Mulchand Trikamlal had filed his return on the same basis, but before the assessment could be completed, he addressed a letter dated 18th October, 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vrajlal Trikamlal as income belonging to the Hindu undivided family of Mulchand Trikamlal and allowed it as deduction in computing the profits and gains of the assessee-firm for the assessment year 1957-58. The assessments for the subsequent years up to the assessment year 1962-63 were also made on the same footing: the amount of interest credited in the account of Vrajlal Trikamlal was assessed as income of the Hindu undivided family of Mulchand Trikamlal and it was allowed as deductible expenditure in the assessment of the assessee-firm. The Income-tax Officer, however, in the course of assessment of the assessee-firm, for the assessment year 1962-63, once again raised the question whether the credit balance the account of vrajlal Trikamlal was the separate property of Mulchand Trikamlal or belonged to the Hindu undivided family of Mulchand Trikamlal. The assessee-firm, with a view to supporting its contention that the credit balance in the account of Vrajlal Trikamlal belonged to the Hindu undivided family of Mulchand Trikamlal, filed three affidavits dated 30th September, 1963, one of Mulchand Trikamlal and the other two of his two sons. What is stated in these affidavits is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-firm. Hence, the present reference at the instance of the assessee under section 256(2) of the Income-tax Act, 1961. The only question which arises for consideration in this reference is whether during the year of account the credit balance standing in the name of Vrajlal Trikamlal in the books of account of the assessee-firm was the separate property of Mulchand Trikamlal or it belonged to the Hindu undivided family of Mulchand Trikamlal and his two Sons. Now, there can be no doubt that Mulchand Trikamlal having inherited the credit balance standing in the account of Vrajlal Trikamlal as an heir or his brother, Vrajlal Trikamlal, it came to him as his separate property. But the contention of the assessee-firm was that by clear and unequivocal conduct Mulchand Trikamlal had treated the credit balance in the account of Vrajlal Trikamlal as joint family property and thrown it into the common hotchpot of the joint family with the intention of abandoning his separate claims upon it and, therefore, the credit balance, though originally received by him as separate property, was impressed with the character of joint family property and was property, belonging to the Hindu un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be drawn that that he voluntarily threw the credit balance into the commn hotchpot of the joint family and if that be so, we fail to see how the credit balance could possibly be regarded as having been impressed with the character of joint family prooperty immediately after it was inherited by Mulchand Trikamlal. As a matter of fact, right from the time of the death of Vrajlal Trikamlal up to the assessment year 1956-57, the credit balance was treated by Mulchand Trikamlal as his separate property and interest paid on it by the assessee-firm was shown by him in his personal assessment. It was only in the course of assessment for the assessment year 1957-58 that Mulchand Trikamlal for the first time claimed that the credit balance was prperty belonging to his Hindu undivided family. It is true that, thereafter, Mulchand Trikamlal treated the credit balance as joint family property by filing returns showing inetest paid on the credit balance by the assessee-firm as income belonging to his Hindu undivided family. But it is apparent from the letter dated 18th October, 1957, and the declaration dated 31st October, 1963, made by Mulchand Trikamlal and his two sons that the credit balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him into the common hotchpot with the inention of abandoning his separate claim in it. The property in such a case acquires the character of joint family property by his own volition and intention by his waiving and surrendering his separate rights in it as separate property. This clearly postulates that the member of the joint family throwing his separate property into the common hotchpot knows that it is his separate property and by his own volition and intention, he waives and surrenders his separate rights in it as separate property. Now, how can he have the intention of abandoning his separate claim in the property unless he knows that it is his separate property ? How can he voluntarily and intentionally waive or surrender his separate rights in the property as separate property unless he is conscious that it is his separate property ? The doctrine of blending, therefore, clearly requires that the property which is said to be impressed with the character of joint family property is separate property of a member of the joint family and he knows it to be his separate property and with full knowledge of that fact he voluntarily throws it into the common stock with the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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