9911796707
TMI Blog1972 (5) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present assessee, H.U.F., is the son of Narmal. Narmal died in the year 1945, leaving three sons Srinivas, Nathmal and Tolaram. The past history is as follows: There was a business in the name of Narmal Srinivas in grocery, jute, etc., and it was started in or about the year 1924 at Dhubri. There was a branch at Gouripore. The records of income-tax available showed that Narmal Srinivas was assessed to income-tax during the years 1933-34, 1934-35 and 1935-36. The name of the business was changed to Nathmal Tolaram in the relevant previous year 1936-37. In that year, as the records revealed, the assessee was Nathmal Tolaram as H.U.F. For the earlier years, the status of that assessee is not clear as the relevant records containing the copies of the assessment orders were not preserved by the department. But, from the assessment year 1942-43, the assessee, Nathmal Tolaram, returned the income from the business as belonging to a H.U.F. up to the assessment year 1949-50. That family of Narmal and his sons, carrying on business as Nathmal Tolaram, remained joint till it was partitioned with effect from April 6, 1949 (the last date of 2005 R.N.). After the partition, the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) That on death and retirement of any partner the business of the partnership may be continued by the heirs or legal representatives of the deceased partner or the remaining partners may continue the business according to their desires and the parties shall at all times be at liberty to co-opt new partners as and when they deem necessary to do so amongst themselves." In the books maintained by the family at the time of the partition, the capital of the business standing in the names of various relations and female members was consolidated and Srinivas, Nathmal and Tolaram were credited each with Rs. 1, 18,172. There was a division of the capital account in the Hindu undivided family books on April 6, 1949. Srinivas Saraf as first party, Nathmal Saraf, Mahavir Prasad, minor represented by his father, Nathmal Saraf as second party, and Tolaram Saraf, Hanuman Prasad Agarwala, minor represented by his father, Tolaram Saraf, as third party, executed a deed of partition on August 23, 1950 (annexure "B"). The deed recites : " Whereas all the above three parties had formed a Hindu undivided family and have been living together and carrying on business since long as members of Hindu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before and after introduction of this outside partner, the petrol business formed part of the business of Nathmal Tolaram as a branch thereof. After the partition was recognised from 1950-51 the share income from the firm, Nathmal Tolaram (including the petrol business), was being assessed in the hands of Tolaram as an individual. The other brothers were also similarly taxed on the share income as individuals. On October 30, 1957, Srinivas, the first of the three brothers, died. Bhagwani Devi, his wife, entered the firm as a partner, thereafter. On March 28, 1959, the firm of Messrs. Nathmal Tolaram was shown to have been dissolved and a new firm, Nathmal Tolaram (Petrol Depot), was shown to have been started so as to continue the petrol business with the same partners. With the capital received on the dissolution of the firm of Messrs. Nathmal Tolaram, Tolaram started a business in the name of Tolaram Bijoy Kumar, to deal in jute and country produce. The income from this business is, admittedly, (that of) a Hindu undivided family business. It appears that for the year 1959-60, as in the previous years after the partition with effect from April 6, 1949, Tolaram, karta of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g their status. According to the Hindu law, which governs the assessee, the position may be described as found in Mulla's Hindu Law, thirteenth edition: " 220. Property, according to the Hindu law, may be divided into two classes, namely, (1) joint family property, and (2) separate property. Joint family property may be divided, according to the source from which it comes, into- (1) ancestral property; and (2) separate property of coparceners thrown into the common coparcenary stock. Property jointly acquired by the members of a joint family with the aid of ancestral property is joint family property. Property jointly acquired by the members of a joint family without the aid of ancestral property may or may not be joint family property; whether it is so or not is a question of fact in each case. The term 'joint family property' is synonymous with 'coparcenary property' 'Separate' property includes 'self-acquired' property." "228. (1) Where property has been acquired in business by persons constituting a joint Hindu family by their joint labour, the question arises whether the property so acquired is joint family property, or whether it is merely the joint property o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, it would assume a different quality. It continues to be ancestral property in his hands as regards his male issue for their rights had already attached upon it and the partition only cuts off the claims of the dividing coparceners. The father and his male issue still remain joint. The same rule would apply even when a partition had been made before the birth of the male issue or before a son is adopted, for the share which is taken at a partition by one of the coparceners is taken by him as representing his branch. Again, the ownership of the dividing coparcener is such 'that female members of the family may have a right to maintenance out of it and in some circumstances to a charge for maintenance upon it ' : see Arunachalam's case. It is evident that these are the incidents which arise because the properties have been and have not ceased to be joint family properties. It is no doubt true that there was a partition between the assessee, his wife and minor daughters on the one hand and his father and brothers on the other hand. But the effect of partition did not affect the character of these properties which did not cease to be joint family properties in the hands of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l to show if any family nucleus was embarked on that business, the character of the business carried on by the father, Narmal, with his sons by whatever name it was described, became evident when for the first time the property consisting of the business as well as the immovable properties were partitioned amongst the sons of Narmal in 1949, after Narmal's death. The registered partition deed was preceded by "a family memorandum of partition" signed by all the parties on April 6, 1949. This fact is particularly noted in the deed of partnership dated 7th April, 1949. The aforesaid family settlement was later incorporated in a formal deed of partition dated 23rd August, 1950. A perusal of this deed clearly evidences an open acknowledgment by all the parties about the erstwhile joint family business carried on under the name and style of Nathmal Tolaram and that it was that business and the immovable properties of that Hindu undivided family that were the subject-matter of partition. The partition deed clearly shows that Tolaram Saraf was executing the deed of partition representing his branch of the family. The property thereby falling into his share under this instrument of partitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned by the terms of the partnership and in accordance with the law of partnership. Fourthly, the fact that the widow of Srinivas joined the firm is in terms of clause (10) of the partnership deed. We, therefore, do not think that the objection of the learned counsel is well-founded. Now, to the sheet-anchor of Mr. Lahiri's submission. Mr. Lahiri submits that the Division Bench decision of the Allahabad High Court in Chiranji Lal v. Commissioner of Income-tax is on all fours with the present case and we should accordingly hold in favour of the assessee. We have carefully examined the aforesaid decision. In our opinion, the facts of that case are not in accord with the basic structure of the Hindu undivided family with which we are concerned here. The following observations from that decision at page 721 will be to the point: "That particular asset upon partial partition went out of the fold of the larger Hindu undivided family of Chiranji Lal-Mohan Lal and even of the smaller family of Chiranji Lal when the half share of the capital which fell to his branch of the family was further divided in the books of the business between him and his two adult sons in specified shares. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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