TMI Blog1954 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... , Bhimraj (father), Janki Devi (mother), and five sons Atma Ram, Chiranjilal Sawarmal, Prabhu Dayal and Jagdish. 2. On 30-6-1946 a new business-under the same name of Bhimraj Bansidhar was started in the first instance with the four major sons as partners of the firm. A deed of partnership was executed by the four sons, Chiranjilal, Atma Ram, Sawarmal and Parbhu Dayal on 3-9-1946, indicating therein that the partnership was formed with retrospective effect from 30-6-1946. This agreement was varied by a second deed of partnership dated 30-10-1946, by which the benefits of the partnership were extended to the minor son Jagdish. For the assessment year 1948-49, the Hindu undivided family filed a return showing an income of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Appellate Tribunal but these appeals were dismissed with slight modification and the decision of the Appellate Assistant Commissioner was affirmed as regards the quantum of assessment upon the Hindu undivided family and as regards the refusal to register the partnership under Section 26A, Income Tax Act. 3. At the instance of the High Court the Income Tax Appellate Tribunal has referred the following question of law under Section 66(2), Income Tax Act: On the facts and circumstances found, did the entries in the books of account dated 29-6-1946, and the deeds of partnership executed on 3-9-1946 and 30-10-1946, constitute in law a disruption of the joint family status in respect of business and bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was an accounting of the assets and liabilities and the business was divided into seven shares and personal accounts were opened for the seven family members and a sum of ₹ 33756/- was credited to the account of each of the seven members. The Appellate Tribunal has said that the book balances were simply brought down from the old folios to the new folios and, therefore, some suspicion must be attached to the transaction. There is no point in this observation for the only method by which a business can be divided as a going concern is by dividing the book balances in the names of persons to whom the shares of business have been allotted. A partition may be brought about by mere specification of the shares in the acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assets of the Hindu family no document is necessary and further Section 25-A, Income Tax Act does not -prohibit members of an undivided Hindu family from entering into a partnership in respect of a portion of the joint property which they have partitioned among themselves. That is the new law laid down by the Judicial Committee in -- 'Sunder Singh Majithia v. Commr. of Income Tax, C. P. and U. P.' AIR 1942 PC 57 (C). The facts of the present case are closely parallel to the case referred to. The joint family was not completely disrupted but its entity continued to exist for the assessment year 1948-49. The case of the assessee is that there was only partial partition of the assets of the Hindu undivided family and the cloth b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial in support of the reasoning of the Tribunal that the bank account was operated upon by the father after the alleged change on 30-6-1946. This is apparent from the fact that in the two letters written by the Bengal Central Bank and the Bharat Bank (see pages 38-39 of the paper-book) there is no statement that the father operated the respective bank accounts even after the partnership was constituted on 29-6-1946. 6. The Income Tax Appellate Tribunal have also stated that the book debts have not been properly assigned by notice to the debtors, nor the Victory Bonds transferred by endorsement and delivery nor the electricity deposit by proper application to the electric Company for transfer. As r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortance therefore, should be attached to the circumstance that notice of formation of the partnership was not given formally to the various creditors by the Hindu undivided family, In this connection it should not be overlooked that the partnership was registered by the documents dated 3-9-1946 and 30-10-1946, and the registration itself is tantamount in law to notice to the persons concerned. 8. The result of this examination is that there is no material to support the finding of the In come-tax Appellate Tribunal that there was no disruption of joint family status on 29-6-1946 in respect of cloth business and that no partnership was constituted on 30-6-1946 of the five sons of Bansidhar in the manner alleged on their behalf. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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