TMI Blog1960 (3) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - - - Dated:- 15-3-1960 - Judge(s) : J. L. KAPUR., M. HIDAYATULLAH., S. K. DAS JUDGMENT The judgment of the court was delivered by HIDAYATULLAH, J.---This is an appeal with the special leave of this court against the judgment and order dated February 16, 1955, of the High Court of Bombay in an income-tax reference under section 66(2) of the Indian Income-tax Act. The appellants are two assessees, Charandas Haridas and Chinubhai Haridas whose cases are identical, and, in fact, there was a consolidated reference by the Income-tax Appellate Tribunal, which was answered by the High Court by its judgment. The respondents are respectively the Commissioner of Income-tax, Bombay North, Kutch and Saurashtra and the Commissioner of Income-tax, Delhi, Ajmer, Rajasthan and Madhya Bharat. The two appellants represented two units of Hindu undivided families. Charandas Haridas represented his wife, three sons and himself, and Chinubhai Haridas represented his wife, son and himself. In stating the facts relative to the two families, it will not be necessary to give them separately, because the question which was answered by the High Court in the judgment under appeal arose i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if the assets themselves continued to remain joint. It further held that the document was "a farce", and did not save the family from assessment as Hindu undivided family. The Tribunal having declined to state a case under section 66(1) of the Indian Income-tax Act, Charandas Haridas moved the Bombay High Court, and obtained an order under section 66(2) of the Act. The question on which the case was stated was: " Whether there were materials to justify the finding of the Tribunal that the income in the share of the commission agency of the mills was the income of the Hindu undivided family ?" The High Court stated that though the reference was very elaborately argued, it raised a very simple question of fact and all that it was required to find out was whether there were materials before the Appellate Tribunal upon which the finding of fact could be rested. The High Court held that though the finding given by the Appellate Tribunal could not be construed as a finding that the document was not genuine, the method adopted by the family to partition the assets was insufficient to bring about the result intended by it. According to the High Court, the Appellate Tribunal was right ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harandas Haridas manages our family's joint property as karta or manager and all of us as members of the joint undivided family are entitled to our joint undivided family as Malik. Our family received a commission of Re. 0-1-11. 5/12 from the Vijaya Mills Co. Ltd. and out of this commission Sheth Charandas Haridas as karta or manager of the family has given already a commission of one pie to Pratima, the daughter of the family. So also out of the commission of Re. 0-2-0 1/2 received by the family from the Gopal Mills Co. Ltd. Sheth Charandas Haridas as karta and manager has given already to Pratima one pie commission. After deducting these Re. 0-1-10. 5/12 and Re. 0-1-11 1/2 commission remained. These commissions and other commission received from various other mills have been partitioned orally by us on Samvat Year 2002 Magsar Vadi 12, dated 31st December, 1945. By this partition we decided that whatever commission fell due till 31st December, 1945, and which is received after 31st December, 1945, should be kept joint and in respect of the commission which accrues from January 1, 1946, and received after that date each of us become absolute owner of his one-fifth share and, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such. In this view of the matter, the Bombay High Court held that the asset continued to be joint in spite of the division of the income after its accrual. In our opinion, here there are three different branches of law to notice. There is the law of partnership, which takes no account of a Hindu undivided family. There is also the Hindu law, which permits a partition of the family and also a partial partition binding upon the family. There is then the income-tax law, under which a particular income may be treated as the income of the Hindu undivided family or as the income of the separated members enjoying separate shares by partition. The fact of a partition in the Hindu law may have no effect upon the position of the partner, in so far as the law of partnership is concerned, but it has full effect upon the family in so far as the Hindu law is concerned. Just as the fact of a karta becoming a partner does not introduce the members of the undivided family into the partnership, the division of the family does not change the position of the partner vis-a-vis the other partner or partners. The income-tax law before the partition takes note, factually, of the position of the karta, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal given such a finding. The document was fully effective between the members of the family, and there was actually no Hindu undivided family in respect of these particular assets. The assets at all times stood in the name of Charandas Haridas, and looked at from the point of view of the law of partnership, the family had no standing. The assets still are in the name of Charandas Haridas, and looked again from the same view point, the division has no different signification. What has altered is the status of the family. While it was joint, the Department could treat the income as that of the family; but after partition, the Department could not say that it was still the income of the Hindu undivided family, when there was none. In the face of the finding that this was a genuine document and not a sham, and that it effectually divided the income and, in the circumstances, the assets, the question answers itself in the negative, that is to say, that there were no materials to justify the finding that the income in the share of the commission agency of the mills was the income of the Hindu undivided family. The appeal will be allowed. The respondents will pay the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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