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1942 (9) TMI 6

Lall, J. This is a reference by the Commissioner of Income-tax, Bihar and Orissa, under Section 66 (3) of the Indian Income-tax Act. It is common ground that Sirdar Indra Singh and his two sons, Sirdar Baldev Singh and Sirdar Ajaib Singh were members of a joint Hindu family up to 1935, but there is a serious dispute between the assessee and the Income-tax department as to whether this Hindu undivided family had joint family property the income whereof was the subject of assessment to income-tax in a number of years and particularly in the year of assessment 1938-39 for the accounting period 1937-38 with which this reference is concerned. In that year Sirdar Indra Singh, the assessee, made a return showing his status as of a Hindu undivided family and was assessed on a total income of ₹ 1,30,805. He contended at the time of making of the assessment that he should be assessed as an individual and not as joint Hindu family. This contention does not appear to have been clearly raised before the Income-tax Officer but was allowed to be raised in the appeal before the Appellate Assistant Commissioner who overruled the contention and held that the status of the assessee was that of .....

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d no nucleus (see the statements in paragraphs 2 and 3 of the petition of the assessee to this Court at page 13-these facts were accepted as correct in the course of the argument before us). On the 26th June, 1925, the assessee moved the Commissioner of Income-tax under Section 33, of the Act to revise the assessment which had been made treating his income as that of an individual. He claimed before the Commissioner that his assessable income was derived from business which "belongs to him and his three sons and his brother Sirdar Hira Singh," that his father is alive but is separate from Hira Singh and Indra Singh and live with their step-mother, that the father and the sons by one wife are joint and the two sons by another wife are joint with each other but separate from their father and stepbrothers. The Commissioner by an order dated the 25th June, 1925, (printed at page 8) while disposing of this application for revision of the assessment held that the assessment will be made on ₹ 60,000, but with regard to the claim that no super-tax should be levied because the business was that of a joint Hindu family he observed that as it was impossible to disprove the sta .....

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the rate of Rs. seven and half per cent, per annum In the recitals it is distinctly and clearly stated that the vendor has for some time past in his own name or as the sole proprietor of Indra Singh and Sons carried on business as the manufacturer of and dealer in steel wire products at Jamshedpur under the name and style of the "Indian Steel and Wire Products". There is no statement that the assessee was the Karta of any joint Hindu family and that he was entering into this large scale transaction on behalf of his joint Hindu family. (This deed of agreement was tendered on behalf of the assessee and marked as an exhibit in the case without objection by the learned counsel for the Income-tax department. The contents of this document were freely used by the Commissioner in preparing his statement of the case and', therefore, it was thought necessary to have it on the record). On the 2nd of December, 1935, Sirdar Indra Singh and his son Sirdar Baldev Singh became the first two subscribers of a memorandum of association to form a private company. This company was styled Indra Singh and Sons Limited the memorandum and articles of association are on the record. Although th .....

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t, alienation and distribution of the income of a number of properties including the shares of Indra Singh and Sons Limited, so the parties in order to avoid ruinous and costly litigation have entered into this family arrangement. In the first paragraph it is provided that the properties described in Part I of the schedule standing in the name of Sirdar Indra Singh are his separate and self-acquired properties. Similarly in subsequent paragraphs reference is made to properties detailed in Parts 2 and 3 of the schedules as belonging separately to the other two sons. In the year of assessment 1939-40, that is subsequent to the year with which the present case is concerned, Sirdar Indra Singh filed an application under Section 25A of the Indian Income-tax Act and relied upon this deed of agreement in support of his claim that the assessee cannot be assessed as a member of a joint Hindu family. Such in brief is a survey of the facts which have been relied upon by the Commissioner in the statement of the case to come to the conclusion that Sirdar Indra Singh and his two sons constitute a Hindu undivided family for the purpose of the Indian Income-tax Act, 1922, and therefore, 'he in .....

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on in 1935 was to disrupt the joint family so that the family could no longer be treated in law as a Hindu undivided family from February 1936, and, therefore, in the year of assessment the status of the assessee in law was that of an individual. Learned Counsel on behalf of the Income-tax department on the other hand argues that the question whether the property and business of the assessee is his self-acquisition or whether it belongs to the admitted joint Hindu family is a question of fact and the Commissioner's finding must be accepted by this Court as correct. It is also argued that the assessee is bound by the admissions which he clearly made before Mr. Middleton in June 1925, that the admission was made deliberately with full understanding of its consequences and indeed with the deliberate object that it should be acted upon. It is urged that the assessee cannot complain that his own statement has been accepted as correct and has been acted upon to his advantage and to the detriment of the revenue since 1925. It is pointed out that there could not have been any mistake or inadvertence in making the assertions in 1925, because the assessee repeatedly relied upon the same .....

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luding portion of the order of Mr. Middleton while disposing of a revision application of the assessee under Section 33 of the Indian Income-tax Act. Unfortunately the exact statement made by Sirdar Indra Singh has' not been produced on behalf of the Income Tax Department. It has been held in a number of cases that the recitals in a judgment are no evidence whatsoever to prove the exact admission made by a party or a witness unless the whole of the statement is recited therein. This is based on a good principle because it may be that the Court has taken an incorrect view or has misunderstood the admission made. In Kashi Nath Pal v. Jagat Kishore Acharya Choudhury 20 CWN 643 a Division Bench of the Calcutta High Court pointed out at page 644 that "the principle is that all judgments are conclusive of their existence, as distinguished from their truth; judgments, as public transactions of a solemn nature, are presumed to be faithfully recorded. Every judgment is, therefore, conclusive evidence, for or against all persons whether parties, privies, or strangers, of its own existence, date and legal effect, as distinguished from the accuracy of the decision rendered; in other w .....

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etty [1926] ILR 50 Mad. 582 where Reilly, J., observed that "the separate property of a Hindu ceases to be his separate property and acquire the characteristics of his joint family are ancestral property, not by any physical mixing with his joint family or ancestral property, but by his own volition and intention, by his waiving or surrendering his special right in it as separate property" and further a few lines later that "a man's intention can be discovered only from his words or from his acts and conduct. When his intention in regard to his separate property is not expressed in words, we must seek it in his acts and conduct, in the way in which he has dealt with the property or has allowed others to deal with it". He therefore, contends that the mere statement made by Sirdar Indra Singh to the Commissioner of Income-tax was not a clear expression of intention within the meaning of Hindu law because such an expression of intention should have been made to other members of the joint Hindu family. He submitted that there is no dispositive document in this case by which Sirdar Indra Singh transferred the property-his own property -to the joint Hindu family. .....

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mpany warranted a declaration of dividends and it could have declared dividends by calling upon its principal shareholder-Mr. Sirdar Indra Singh- who happens to be the managing director, to make repayments of his debts (see exhibit 2 of this Court). The Commissioner on the other hand relied upon this decision of the Board of Referees as if it held "that the private company at Calcutta was practically a one man show, that the company may not be assessed as a separate entity and that its three shareholders (Sirdar Indra Singh and his 2 sons), who are also the members of the joint family, could be assessed directly on the income of the private company under that section" (see paragraph 12 of the statement of the case at page 21). This is a misapprehension of the decision of the Board of Referees. As the Commissioner had relied upon this decision but had not sent up the actual decision of the Board of Referees we have admitted this upon the record of this case with the consent of both parties and have marked it as exhibit 2. The Commissioner appears to have fallen into a serious error in treating the shareholders of the company as equivalent to the company itself. The Commiss .....

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property and the business in question belonged to the joint family and not to Sirdar Indra Singh alone so that the income derived therefrom in the previous year was assessable in the year of assessment as the income of Hindu undivided family. This Court is not interfering with the finding of fact by the Commissioner but is merely considering the proper legal effect of all the proved facts which have been stated in the reference by the Commissioner and which were admitted by the parties. Lord Buckmaster in delivering the judgment of their Lordships of the Judicial Committee in Nafar Chandra Pal Choudhry v. Shukur Sheikh [1918] ILR 46 Cal. 189 observed at p. 195: "Questions of law and of fact are sometimes difficult to disentangle. The proper legal effect of a proved fact is essentially a question of law, so also is the question of admissibility of evidence and the question of whether any evidence has been offered on one side or the other; but the question whether the fact has been proved, when evidence for and against has been properly admitted, is necessarily a pure question of fact". In Ramgopal v. Shamskhaton [1892] ILR 20 Cal. 93, Sir Richard Couch in delivering the ju .....

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ansferred to Sirdar Indra Singh in order to become the governing director. The Commissioner in my opinion was in error in treating this ₹ 12,000 as the income of the joint Hindu family. The Commissioner relies upon the fact that Sirdar Indra Singh in his return of income dated the 14th July, 1937, for the year 1937-38 declared the assessable income to be the aggregate of the director's fees of all the three members of the family, that is himself and his two sons. But in my opinion this declaration is of no consequence. As Sirdar Indra Singh was filing a return on behalf of the joint Hindu family he included all the income of the members but that would not make an individual income the income of the joint family as such. For these reasons, I would answer question No. 3 in the negative, that is to say ₹ 12,000 cannot be included in the income of the Hindu undivided family. In the view which I have taken it is unnecessary to consider the alternative argument advanced on behalf of the assessee by Mr. Isaacs. But it is proper that I should express my views on this aspect of the case also. Section 25A, sub-clause (1), clearly provides that "where, at the time of maki .....

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