1978 (2) TMI 1 - SC - Income Tax

Partition deed formed by the karta and others contains a clause that business was joint family business the share of karta in a partnership which came into being on the partition could not be his separate property but it is the property of the joint family - assessee s appeal is dismissed

Summary

Issues:
- Assessment of income derived from a partnership business as individual income.
- Determination of whether the partnership business was originally a Hindu undivided family business.

Analysis:
The case involved the appellant, a Hindu undivided family represented by its karta, Tolaram, who claimed separate assessment of income derived from a partnership business. The business, initially a Hindu undivided family business, was later converted into a partnership business after a partition. The appellant's claim for separate assessment was rejected by the Income-tax Officer, the Appellate Assistant Commissioner, the Income-tax Tribunal, and the High Court.

In the assessment year 1960-61, the appellant claimed separate assessment of income from the partnership business. The High Court framed a question regarding the assessability of the share income in the hands of the appellant-family. The court referred to Mulla's Hindu Law and emphasized the distinction between joint family property, joint property, and partnership property. The court concluded that the partnership business was originally a Hindu undivided family business, and thus, the income could not be assessed separately.

The court relied on the case of N. V. Narendranath v. Commissioner of Wealth-tax, which highlighted that even after a partition, the properties did not cease to be joint family properties. The court also discussed the case of Chiranji Lal v. Commissioner of Income-tax, emphasizing that unless the individual members had blended their share income with the family income, it could not be assessed as joint family income.

The court dismissed the appeal, upholding the findings of the Tribunal and the High Court. It concluded that the share of Tolaram in the partnership business, post-partition, belonged to the joint Hindu family and not as his separate property. The court rejected the arguments presented by the appellant's counsel and made no order as to costs.

In summary, the judgment clarified that the income derived from the partnership business was assessable as joint family income, as the business was originally a Hindu undivided family business and did not transform into separate property post-partition. The court's decision was based on legal principles governing joint family property and partnership property, ultimately dismissing the appeal.