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TMI Blog1985 (10) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to determine the status of the assessee as that of individual." 2. Before we adjudicate upon the common ground raised in these three appeals, we might briefly state the facts leading up to the controversy. 3. For the assessment year 1975-76, all the abovementioned three assessees filed returns showing incomes of Rs. 12,235 as share from the firm named Devendra Bros. in the status of an HUF. It was contended that the share incomes having been derived in the status of HUFs were assessable as such in that status only and not in the status of individuals. In support of the contention, a copy of the partnership deed of Devendra Bros. had been furnished. The preamble of that partnership deed shows that it had been entered into between Shri Girdharilal Jain, father and his three sons, namely, Devendra Chandra Jain, Sharat Chand Jain and Bipin Chand Jain. It further shows that while Shri Girdharilal Jain had entered into the partnership as individual, his three sons had entered into the partnership as kartas of their respective HUFs. The contentions taken by the assessees were rejected by the ITO. The latter held that unless and until the income was derived with the aid and assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be the incomes of the three abovenamed HUFs and that important fact ought not to have been ignored by the authorities below in coming to the conclusion that they reached. On a query being made from us as to how could there be smaller HUFs without there being a partition of the bigger family headed by Shri Girdharilal Jain, the learned counsel submitted that in order to bring into existence smaller HUFs, there need not always be a partition of a bigger HUF. According to him in all bigger HUFs, smaller HUFs always exist and that just because the properties of the bigger HUFs are not partitioned, the existence of smaller HUFs cannot be denied. In order to illustrate his point, Shri S.B. Gupta refers to a gift which might be received by a branch of an HUF to be enjoyed by that particular branch. According to the learned counsel, whenever such a gift is received for the benefit of a smaller branch of an HUF, a smaller HUF comes into existence. Similarly, Shri S.B. Gupta gives another illustration and submits that whenever an individual member of a smaller HUF throws a certain self-acquired property into the common stock of his branch of family, a smaller HUF comes into existence not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AC were also not valid appeals and, therefore, these ought to be rejected. On merits, Shri Tajinder Singh placed reliance on the findings given by the ITO and the AAC. 6. We have given our very careful consideration to the rival submissions. Even though we may not substantially agree with the preliminary objection raised by the departmental representative, we would be failing in our duty if we do not decide the matter on merits. The preamble of the partnership deed of Devendra Bros., no doubt, states that Devendra Chandra Jain, Sharat Chand Jain and Bipin Chand Jain had joined hands as partners as karta of their respective HUFs but that fact by itself would not create HUFs if these did not otherwise exist in law. These three partners had in fact made no capital investment whatsoever in the partnership business which was to carry on the activity of buying and selling of real estate and flats in multistoreyed buildings and to act as commission and selling agents thereof. Besides, we also significantly noticed that the HUF of Shri Girdharilal Jain continued to be intact and that when the partnership in question was formed, smaller HUFs of Devendra Chandra Jain, Sharat Chand Jain and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mes derived by Devendra Chandra Jain, Sharat Chand Jain and Bipin Chand Jain were in fact and in law assessable as their individual incomes. 7. Before holding as above, we have carefully gone through the decisions on which reliance has been placed by the learned counsel of the assessees. The decision of the Hon'ble Supreme Court in the case of Ram Laxman Sugar Mills was a decision given on entirely different facts. In that case it had been held that when a manager of an HUF had entered into partnership and had signed the document in that capacity, it did not result in the members of the family themselves becoming partners in that firm. Their Lordships had further held that in ascertaining the legal effect of a transaction, a Court must seek to find out in the first instance as to what was the intention of the parties. In these present cases, the intention might have been there that the income derived from the three assessee-appellants was to be the income of their HUFs but that intention could not be given any effect as the very prerequisites of the existence of an HUF were absent in the present case. The other decision of the Hon'ble Supreme Court in M.P. Periakaruppan Chettiar' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor is significantly absent. In their decision in the case of Seth Chunilal Parsram their Lordships of the Hon'ble Mysore High Court had disapproved the decision of the Tribunal who had held that the profit earned in cloth business was the income of the HUF of Chunilal Parsram. Their Lordships held that having regard to accounting entries made in the books of account, the income clearly belonged to the individual and not to the HUF. We fail to understand as to how this decision is in any way relevant to the point at issue in the appeals before us. The decisions in Thakur Hari Singh's case and Gundlapalli Mohan Rao's case also do not help the case of the appellant inasmuch as the cases before us are not cases of blending of individual property into the common stock of the HUF. As we have repeatedly stated earlier, the present cases are cases where right from the very beginning that is from the date the partnership of Devendra Bros. came into existence it had been contended that Devendra Chandra Jain, Sharat Chand Jain and Bipin Chand Jain had entered into the firm as kartas of their HUFs. This contention has not been acceptable to us for two main reasons, viz., that the separate ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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