Law:

Section:

Section 3 of the Indian income-tax act, 1922 [corresponding to section 4 of the Income-tax Act, 1961]-Hindu undivided family-Assessability of income-Accident insurance policy-Amount received by legal representatives on death of insured in accident-Whether tribunal correct in treating it as belonging to legal representative in his individual capacity and not as HUF or ancestral property-Held, on facts, yes, since property came into existence only after death of insured-Dividend income from shares acquired our of loan taken from HUF by wife and minor son-Whether tribunal legally correct in holding that such income was not includible in income of HUF-Held, on facts, yes Facts Late M was the karta of HUF consisting of himself, his wife and two sons, B and S. He took out a personal accident-cum-death insurance policy for a period of one year from 1-12-1949 to 30-11-1950. One of the terms of the contract of insurance was that in the event of his death by accident, compensation of Rs. 5,00,000 was payable to his legal representatives. M died in an air crash on 12-12-1949. The compensation was paid by the insurance company equally to both sons. The share of the assessee B aggregated Rs. 2,49,874, which was invested by him in shares and deposits. Dividend and interest accrued on these investments. Some of the shares were subsequently sold by B to his wife (100 shares) and minor son (400 shares). The minor son and his mother are alleged to have taken loans from the HUF for purchase of these shares and later repaid the said loans. Dividends accrued to them on these shares for the assessment years 1958-59 and 1959-60. In the assessment of B for the assessment year 1957-58, the Tribunal eventually held (i) that the said amount of compensation received by B, under the insurance policy on the death of M, was not inherited by him from his deceased father and it did not, therefore, belong to the HUF; (ii ) that the said compensation belonged to B in his individual capacity; (iii) that, consequently, the interest and dividend on the investment made by him out of the funds were his income in his individual capacity; and (iv ) that the shares purchased by the wife and minor son,…

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