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TMI Blog1980 (1) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case, the Tribunal was legally correct in holding that the dividend on 400 shares of M/s. Bharat Ram Charat Ram (P.) Ltd. acquired in the name of Sh. Tilak Kumar, a minor member of the family, on 100 shares acquired in the name of Smt. Urmila Bansi Dhar, karta's wife, could not be included in the income of the assessee-Hindu undivided family ? " The facts out of which they arise may be summarised as below. The late Lala Murli Dhar was the Karta of a HUF consisting of his wife and two sons, Lala Bansi Dhar and Lala Sridhar. He took out a personal accident-cum-death policy on the London and Lancashire Insurance Company Ltd. for a period of one year from December 1, 1949, to November 30, 1950. Under the terms of the policy Lala Murli Dhar was the insured, though it is said that the premium for the policy was paid by the Delhi Cloth General Mills Co. Ltd. who was the employer of Lala Murli Dhar. Under the contract of insurance two different contingencies, both uncertain, were in contemplation. Firstly, if any bodily injury were to be caused to Lala Murli Dhar by violent, accidental, external and visible means, compensation was payable to him for disablement and medical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la as individuals and the income from the shares, therefore, belonged to them in their individual capacity and could not be included in the income of the assessee-HUF of which Lala Bansi Dhar is the karta. The reference of the questions set forth above was sought by the revenue against these findings on questions of law decided by the Tribunal. These questions are considered below seriatim : Question No. 1: The personal accident insurance policy, taken out by Lala Murli Dhar, was a contract entered into by him with the insurer. Lala Murli Dhar was the insured. They were the only two parties to this contract. The employer of Lala Murli Dhar who paid the premium for the policy cannot be regarded as a party to this contract. It is not material as to whether it was the employer or Lala Murli Dhar who was the policy holder inasmuch as the rights under the contract belonged only to the contracting parties and, therefore, the benefit of the insurance arising out of the contract could accrue only under the terms of the contract. The accrual of the benefit was, however, arranged in two different was. The compensation payable for injuries which may be suffered by Lala Murli Dhar was paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically excludes death caused by accident only from the concept of life insurance business. On principle the distinction between the two may be explained more fully as it is the crux of the present case before us. Normally, a contract may ripen into property. This is why s. 4 of the Transfer of Property Act, 1882, provides that the chapters and sections of that Act which relate to contracts shall be taken as part of the Indian Contract Act,1872. The question, however, arises as to when a contractual right is property and when it is not. In Smt. Shanthabai v. State of Bombay, AIR 1958 SC 532 at 536 (para. 26), it was observed by the Supreme Court as follows : " To bring the claim under art. 19(1)(f) or art. 31(1) something more must be disclosed, namely, a right to property of which one is the owner or in which one has an interest apart from a purely contractual right." This distinction can be supported by reference to the relevant statutes. Firstly, ss. 3l and 32 of the Contract Act read as follows : 31. A 'contingent contract ' is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen." " 32. Contingent contracts to do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o existence. It cannot, therefore, be said that such property which is to come into existence in future belongs to the insured. This is also in consonance with the unenforceable nature of the contract in view of s. 32. The same result is obtained by reading the definition of " actionable claim " in s. 3 of the Transfer of Property Act, which is as below : " Actionable claim " means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent." It is useful to read the definition of " actionable claim " bearing in mind that actionable claim represents par excellence the type of property that a person can have by way of a contractual right. The test of the applicability of this definition is that the right of the claimant should be such as the civil courts would recognise as affording grounds for relief. If a personal accident insurance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atives after the death of the assured in view of ss. 19, 21, 23 and 24 of the Transfer of Property Act. But that would not help the revenue. For, that would only show that even during the lifetime of the assured, the contingent beneficial interest belonged not to the assured but to his legal representatives. Certain decisions under the Estate Duty Act were referred to during the course of argument. We are here not concerned with the assessment of estate duty. That assessment becomes relevant when property passes on death or is deemed to pass on death. The deeming provision is not relevant at all in our case. So far as the concept of passing property on death in the Estate Duty Act is concerned, it has been interpreted to mean the passing of beneficial enjoyment of property or a change in title or possession by the Supreme Court in Controller of Estate Duty v. Hussainbhai Mohamedbhai Badri [1973] 90 ITR 148, dismissing the appeal against the decision of the Gujarat High Court in Controller of Estate Duty v. Husenbhai Mohamedbhai Badri [1970] 76 ITR 14. Particular reliance was place by the learned counsel for the revenue on the decision of this court in Controller of Estate Duty v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se to Lala Murli Dhar. Since ancestral property comes into existence only when the ancestor owned it and it is inherited by the descendants on the death of the ancestor, this property was not ancestral in the hands of Lala Bansi Dhar, It was, therefore, his property in his individual capacity and was not the property of the HUF, of which he was the karta. This is our answer to question No 1. Question No. 2 : The amount of Rs. 2,49,874, having been held above as the individual property of Lala Bansi Dhar, the income from the investment of the said amount would be of the same character and would also be the individual property, of Lala Bansi Dhar and not the property of the HUF of which he is the karta. This is our answer to question No. 2. Question No.3 : The finding of fact given by the Tribunal at page 95 of the paperbook is that the amount received by Tilak Kumar from the HUF for the Purchase of the shares was by way of a loan. Our attention has been drawn by the learned counsel for the assessee to the accounts which he and his mother,' Smt. Urmila, had with the HUF. These accounts are reproduced on pages 34 onwards of the supplementary paper-book, in ITR Nos. 82 and 83 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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