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TMI Blog1960 (4) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was a partial partition of some of the assets of this Hindu undivided family effected by a deed of partition dated November 12, 1955. Under the terms of this deed of partition, the five annas share and interest in the aforesaid firm which was held by Ashokbhai on behalf of the aforesaid Hindu undivided family came to the share of Ashokbhai, the individual, in his own right absolutely. At the time when the deed of partition was executed, the accounts of the partnership firm of Amrit Chemicals had been made up to the end of the calendar year 1954. In connection with the amount claimable in respect of the business done by the partnership after January 1, 1955, the deed of partition provided as under : The account of profit and loss of the said partnership firm from January 1, 1955, remains to be made up and on the making of such accounts whatever profit or loss the partnership firm may have made thereout Seth Ashokbhai Chimanbhai shall be the full owner and responsible for a five annas share out of the rupee of sixteen annas. The business of the partnership continued after the date of the deed of partition. The account of the profits of the partnership was made up for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are in the firm of Amrit Chemicals from January 1, 1955. Reliance in this connection was placed upon some of the clauses of the said deed of partition. Clause 4 of the deed of partition is in the following terms: 4. There is joint family property of the joint family of Seth Ashokbhai Chimanbhai of the First Part. Out of that we are making a partial partition of the property as hereinafter stated, particulars whereof are as follows : (a) In the partnership firm in the name of the Amrit Chemicals five annas share out of sixteen annas in the rupee including goodwill together with the benefit and liability in respect of the profit and loss relating to five annas share in a rupee of sixteen annas made by the said firm from January 1, 1955, of the value of about ₹ 70,001. By clause 6(a) it is provided that the aforesaid property came on partition to the share of Seth Ashokbhai Chimanbhai, the individual. Clause 8 of the deed of partition is material for the purpose of considering this question. It runs as under : The partnership firm of the Amrit Chemicals has been in existence from January 1, 1946, and a deed of partnership dated August 14, 1946, has been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the deed of partition, namely, November 12, 1955, it cannot be said that any income had accrued to the Hindu undivided family of Ashokbhai Chimanbhai from and after January 1, 1955. Strong reliance was placed on behalf of the assessee on a decision of the Supreme Court, Sassoon Co. Ltd. v. Commissioner of Income-tax [1954] 26 ITR 27 (SC). In that case, an agreement was entered into with E.D. Sassoon United Mills Ltd., by Sir E.D. Sassoon and others carrying on business in partnership in the name and style of Messrs. E.D. Sassoon Co., whereunder E.D. Sassoon Co. were appointed the managing agents of E.D. Sassoon United Mills Ltd. Under the terms of the agreement, E.D. Sassoon Co. and their assigns were appointed agents of the company for a period of thirty years and thereafter until they resigned or were removed from office by a special resolution of the company. Under clause 2 the remuneration of the Sassoons and their assigns was fixed at a commission of 7 per cent, per annum of the annual net profits of the company after making all proper allowances and deductions from revenue for working expanses chargeable against profits, with a proviso that if in any year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that any income had accrued to him. Placing reliance upon this case, it was argued that, in the present case, no income had accrued to the assessee Hindu undivided family of Ashokbhai Chimanbhai after January 1, 1955. Under the provisions of the Income-tax Act, a firm is regarded as an entity assessable for income-tax purposes. Tax is payable in respect of the profits of a firm, having regard to the accounting period of the firm. During the continuance of a firm for the full accounting period, tax is not liable to be separately assessed and paid in respect only of a part of the accounting period. The accounting period in connection with the firm of Amrit Chemicals was the calendar year. The amount of profits made by the firm for the whole of the calendar year 1955 would have to be ascertained before the same could be subjected to tax. Under the provisions of the Income-tax Act, the profits of the firm of Amrit Chemicals were not liable to be ascertained from January 1, 1955, up to November 12, 1955, and subjected to tax. Reliance in this connection was placed on a decision of the Supreme Court, Bhogilal Laherchand v. Commissioner of Income-tax [1955] 28 ITR 919 (SC). In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership with others and was carrying on business along with his other partners in the firm name and style of Amrit Chemicals and had a five annas share in that firm. Under the Hindu law, when a managing member of a joint family enters into a partnership with strangers, the other members of the family do not ipso facto become partners in the business so as to clothe them with any rights and obligations of a partner as defined by the Indian Partnership Act. In such a case, the family as a unit does not become a partner but only such member of the family as in fact enters into a contractual relation with strangers and the partnership that is constituted would be a partnership governed by the provisions of the Indian Partnership Act, 1932. In this connection, a reference may be made to a decision of the Privy Council, Pichhappa Chettiar v. Chokalingam Pillai [1934] 36 Bom LR 976 (PC). The Supreme Court, in the case of Commissioner of Income-tax v. Kalu Babu Lal Chand [1959] 37 ITR 123 at 127 (SC), held as follows : It is now well settled that a Hindu undivided family cannot as such enter into a contract of partnership with another person or persons. The karta of the Hindu undivided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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