COMMISSIONER OF INCOME-TAX, MADHYA PRADESH versus MAHARAJA BAHADUR SINGH & ORS.

Citation: [1986] 3 S.C.R. 1020 · Decided: 13-10-1986 · Supreme Court of India · Bench: R.S. PATHAK · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
ll 
c 
ll 
( i 
COMMISSIONER OF INCOME-TAX, MADHYA PRADESH 
v. 
MAHARAJA BAHADUR SINGH & ORS. 
OCTOBER 13, 1986 
[R.S. PATHAK AND SABYASACHI MUKHARJI, JJ.] 
Income Tax Act, 1961-lncome derived by beneficiaries under 
Trust Deeds-Income derived in individual capacity and not as repre-
senting HUF-Assessment of Income-Determination of. 
One Hokum Chand Seth, who constituted a HUF with the mem-
bers of his family, owned extensive properties. The properties were 
partitioned between him, his wife and their son in equal shares by a 
Deed of Partition dated March 31, 1950. dn the same date, Hukum 
<;_hand Seth and his wife executed two trust.deeds nominating their son 
and five grandsons as the beneficiaries in respect of their shares in the 
aforesaid properties. The trust deeds which contained identical terms 
inter alia provided (a) that in the event of a beneficiary dying before the 
time of distribution of the properties between the beneficiaries, the 
share of the beneficiary so dying would be used to support and maintain 
his widow and his male issue in such ·manner as the trustees shall "in 
their absolute and uncontrolled discretion deem proper" and the sur-
plus, if any, of the share of that beneficiary and the income therefrom 
would be accumulated and kept in credit to his account and preserved 
in order to be distributed; (b) that upon the youngest of the bene-
ficiaries attaining the age of 30 years, the trustees would divide and 
distribute the trust properties together with the accumulated interest 
and income thereon among the beneficiaries according to their respec-
tive rights and shares; and (c) that if at the time of the division and 
distribution any beneficiary should have died without leaving any son 
but leaving only a widow' the widow would get half of the share of that 
beneficiary while the other half would be distributed among the remain-
ing beneficiaries and the heirs of the beneficiaries entitled to distri-
bution. 
With the passage of time the beneficiaries came into possession of 
their respective shares of the properties and the income from those 
11 
properties wa• returned by them for the purpose of their income tax 
!020 
>
COMM OF INCOME-TAX v. M.B. SINGH 
1021 
assessment in their individual status, but subsequently they began to 
A 
~ 
assert that the properties were received by them as the Karla of their 
respective Hindu undivided families and that therefore the income was 
liable to be assessed in that status. The Income Tax Officer, during the 
relevant assessipeut years assessed the assessees/beneficiaries in their 
individual status and these assessments were confirmed by the Appel-
B 
late Assistant Commissioner a'ld the Income Tax Appellate Tribunal. 
~ 
However, in a reference at the instance of the assessees, the High Court 
held that the properties had been settled with the assessees in their 
~ 
representative capacity as Kartas of their respective Hindu undivided 
families. 
c 
Allowing the appeals by the Revenue to this Court, 
HELD 1. I The High Court has erred in the view taken by it of 
~ 
the two trust deeds. The question whether the income belongs to the 
individuals or Hindu undivided families has to be resolved upon the 
contents of the trust deeds, their terms and conditions being free from 
D 
ambiguity. I 10280; 1026F] 
1.2 Where the document contains no clear words describing the 
kind of interest which the donee is to take, the question is one of con-
struction and the court must collect the intention of the donor from the 
). 
language of the document taken along with the surrounding circumst-
E 
ances. There is no presumption one way or the other. Each case must be 
decided on its own facts and each document calls for its own particular 
construction. [1026H; 1027A-B] 
r 
C.N. Arunachala Mudaliar v. C.A. Muruganatha Mudaliar and 
Another, [1954] 5 SCR 243, referred to. 
F 
---
In the instant case, on the plain terms of the tr.us! deeds, the 
prope~ties were intend~ to devolve on the beneficiaries in their indi-
vidual capacity. The circustances surrounding the execution of the two 
documents indicate that a common intention inspired the minds of the 
two sdtlors. This has considerable significance when it. is realised that 
G 
while one trust deed was executed by a male member of the family the 
other was executed by a female member of the family. The course of 
devolution under the Hindu law would be materially different in the two 
-{ 
cases and, the

Excerpt shown. Read the full judgment & AI analysis in Lexace.