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TMI Blog1970 (2) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed in the hands of the Hindu undivided family of which the assessee is the ' karta ' for the assessment year 1957-58 ? " The question of law referred in the second reference is : " Whether, on the facts and in the circumstances of the case, the Tribunal erred in law or acted without evidence in holding that the assessee was a partner in Vijaykumar Ramanlal and Co. in his capacity as the karta of the Hindu undivided family ? " Prior to S.Y. 1997 (1940-41) Champaklal Dalsukhbhai and Mulchand Jambubhai, along with many others, were members of a joint and undivided Hindu family. All the coparceners of that joint family became divided as on Aso Vad 30, S.Y. 1997. Champaklal as well as Mulchand were assessed to income-tax as individuals in respect of the twelve assessment years 1944-45 to 1955-56 relating to the accounting years S.Y. 1999 to S.Y. 2010. Both these references relate to the assessment year 1957-58, the accounting year being S.Y. 2012, ending on 2nd November, 1956. Each, Champaklal as also Mulchand, was a partner in four firms, the four firms being : (1) Messrs. Chhaganlal Kasturchand, (2) Messrs. Kasturchand Amarchand, (3) Messrs. Aswin and Co., Bombay, and (4) Mes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fourth firm was not included, but the share of profits from the other three firms was included as forming part of the income of the respective Hindu undivided family of each of them. So far as the share of income of the fourth firm was concerned, each of them filed a separate return as an individual. The return as the karta was sent by each of them with a covering letter dated the 30th November, 1957. The contents of the letter written by each are identical. The letter refers to the said earlier letter dated the 26th October, 1956. The letter states, in effect, that in the said letter dated the 26th October, 1956, and in the return sent along with that letter each had made a mistake in that the share of income of each of them from the profits of the fourth firm had been included and shown in the return as forming part of the income of the Hindu undivided family although it should have been shown as the income of each of them as his individual or personal income. It states that the mistake happened to have been made as each had received income in that year from several concerns and that his income from several concerns was derived from the assets which were received by each on par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. The question as reframed is : " Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that for the assessment year 1957-58 the assessee was a partner in Vijaykumar Ramanlal and Co. in his individual capacity ? " In the second reference, however, the Tribunal upheld the decision of the Appellate Assistant Commissioner, with the result that Mulchand's share of the profits of the fourth firm was treated as forming part of the income of his Hindu undivided family. The second reference has been made at the instance of Mulchand, he being the assessee in that reference. Now, as stated earlier, the fourth firm was started in S. Y. 2005. The partnership deed does not provide that any of the partners constituting that firm had to contribute anything by way of capital of the firm and in fact no partner contributed anything by way of capital. The orders of the Appellate Assistant Commissioner show that the finance needed by the fourth firm was obtained by borrowing loans. The loans were borrowed from the firm of Messrs. Chhaganlal Kasturchand as also from others, including banks. The fourth firm paid interest to all its creditors from whom i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion so far as the first three firms were concerned. Each of them had contributed his share of the capital out of the funds of his Hindu undivided family. It was, therefore, realised that the share of profits earned with the aid of those funds belonged to the Hindu undivided family and not to the karta in his personal individual capacity. This correction was sought to be made by the return filed and by the covering letter dated the 26th October, 1956. The letter and the return, however, refer to the share in respect of all the four firms. The return for the next year, which is the one relevant to these two references, was on the basis that the share of income of the fourth firm formed part of the income of the karta in his individual status and the reason for doing so was explained in the said covering letter dated the 30th November, 1957. The reasons have been specifically stated in that letter. One point which appealed to the Tribunal in the second reference is that Champaklal had solemnly declared in his return in respect of the accounting year S. Y. 2011 that his share of income from the fourth firm was the income of his Hindu undivided family. In our opinion, such importance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the manager of the family and it makes no difference in this respect that the manager is the father of the other coparceners. We must also bear in mind that the fourth business was a new business started by each of the two assessees after the partition of their joint family. In Hindu law a manager, even if he be a father, cannot impose upon the other coparceners the risk of a new business. In this case there is no indication by way of any money being contributed by the two managers by way of capital of the fourth firm. There is no other evidence whatever to show that there was any intention on the part of either Champaklal or Mulchand to become a partner in the fourth firm as representing his respective Hindu undivided family and not in his individual personal capacity. The presumption of the Hindu law, as pointed out by the Supreme Court, must, therefore, prevail for want of any evidence to rebut it. The fact that the fourth firm took loans from Messrs. Chhaganlal Kasturchand cannot rebut that presumption. The fourth firm borrowed such loans from Messrs. Chhaganlal Kasturchand just as it borrowed loans from outsiders. Looked at conversely, Messrs. Chhaganlal Kasturchand advan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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