TMI Blog1970 (2) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... the name of Shah Prabhudas Gulabchand is justified in law ? The facts appear in the statement of the case. The facts which require to be noticed are as follows : About six months prior to October 22, 1943, one Shah Prabhudas Gulabchand died intestate leaving him surviving as his only heirs and next assessee, Chandrakant Prabhudas. Prior to his death, Prabhudas Gulab chand carried on business in toilet, medicines, perfumery, etc., in the firm name of Shah Prabbudas Gulabchand. Upon his death, the business came by inheritance to the four minor sons of Prabhudas. This business was carried on, having regard to the minority of the four sons, by the widow Bhikibai for six months by herself. Thereafter, from Kartak Sud 1 Samvat year 2000, she carried on the very same business in partnership with one Shah Khushaldas Gangadas who was the mehtaji and the servant of the deceased Prabhudas whilst he carried on the above business on terms and conditions recorded in a deed of partnership dated October 22, 1943, which is annexure " A " to the statement. Under the deed of partnership, Khushaldas was a working partner with a share of 6 annas. Bhikibai. owned the remaining share of 10 annas. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s left by deceased Prabhudas. The main reason for the rejection of the application for registration under section 26A and for assessing the second applicant, Chandrakant, in the above manner was that in fact from the date of the death of Prabhudas the business of the firm of Prabhudas Gulabchand which had come by inheritance to the above undivided family had been carried on by Bhikibai for the benefit of the family. The first partnership was formed only because mehtaji Khushaldas was helpful as a working partner. The second partnership was in fact not a genuine partnership but a partnership made between the undivided family mentioned above and one of its coparceners, the second assessee, Chandrakant. In the appeals separately filed by each of the assessee-applicant the Appellate Assistant Commissioner by his separate orders made on February 6, 1961, reversed the findings made by the Income-tax Officer. The order of assessment made against Chandrakant was set aside. Directions were given for granting registration to the above firm under section 26A. Those orders made by the Appellate Assistant Commissioner were set aside by the Appellate Tribunal by separate orders made on May 8, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aid of or with any detriment to the joint family property. The partnership before their Lordships was constituted of the Hindu undivided family consisting of Lachhman Das and his seven sons, and Daulat Ram, being one of the seven sons. This Daulat Ram had separate property and was the owner of at least a sum of Rs. 48,000 in his own separate right. The Hindu undivided family of Lachhman Das made the partnership with Daulat Ram and carried on the business of Indian Woollen Textile Mills. The question before their Lordships was whether there could be a valid partnership between, Lachhman Das representing the Hindu undivided family on the one hand and Daulat Ram as member of the undivided joint family in the individual capacity on the other. That question was answered in the affirmative, but in connection with that answer, particular stress was laid on the fact of Daulat Ram having with himself self-acquired separate property and he having invested a specific sum of Rs. 48,000 for running the partnership business of the Indian Woollen Textile Mills. In connection with the question before them, the observation of their Lordships was : " In this view of the Hindu law, it is clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y who could enter into partnership with one of the coparceners for further carrying on of joint family business. This coparcener who could be accepted as a partner by a karta becomes a partner " quoad his separate property ". In other words, a coparcener who has no separate and self-acquired property of his own cannot be accepted as a partner by a karta of the undivided family for carrying on the joint family business, because contribution of separate undivided estate towards carrying on of the partnership business is a necessary ingredient for bringing into existence of such a partnership. Now, in the case of I. P. Munavalli v. Commissioner of Income-tax the High Court of Mysore appears to have read the decisions of the Judicial Committee and the Supreme Court referred to above to mean that a partnership could come into existence between a karta of an undivided Hindu family and one of the coparceners if such coparcener merely agrees to become a working partner of the firm. With great respect, we are unable to take that view of the above decisions. Having regard to what we have, in the above discussion, held to be the ratio of the Judicial Committee, it is necessary to now look ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kind, had not separated from the joint family and was not owner of any divided and/or separate property. Chandrakant never contributed any sum towards capital and/or towards the carrying on of the business of the present partnership. The profits and/or losses suffered by Bhikibai were credited and/or debited in the capital account of Bhikibai which was, as already mentioned, continuously maintained in the above manner on the footing that it belonged to the four minors whose business was upon inheritance carried on by Bhikibai in the manner described above. One fact which remains to be recorded is that it appears from the contents of the order made by the Appellate Assistant Commissioner that in 1957-58, Bhikibai had sold certain ornaments and the sale proceeds amounting to Rs. 8,223 were also credited in the capital account mentioned, above. It is not investigated and, therefore, difficult to state whether the ornaments were of the separate ownership of Bhikhibai and/or belonged to the estate of Prabhudas, and, accordingly, whether this sum of Rs. 8,223 which formed part of the capital account belonged to Bhikibai personally or was of the same nature as the other amounts standing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not becoming a partner with Bhikibai as a karta of any undivided family. As is rightly recited in the deed of partnership, it was Bhikibai who introduced Chandrakant as if he was a stranger to the family in the partnership merely because Chandrakant agreed to become a working partner. The ratio of the decisions of the Judicial Committee and the Supreme Court is that a coparcener can never become a partner in the business carried on by a karta of an undivided family, unless he is separate and is owner of separate property and makes contribution thereof. In this case Chandrakant had never any separate property or estate and never contributed any separate property towards the development of the partnership business. There is, therefore, no reason to set aside the finding of the Appellate Tribunal that this is a partnership which was made between two coparceners for carrying on business of the undivided family and that such a partnership could never be a valid partnership in law. Such a partnersbip is foreign to the well established principle governing an undivided Hindu family. In the result, our answers to the questions are : Question No. 1 in the negative. Question No. 2 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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