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TMI Blog1991 (7) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... ee-Hindu undivided family, (2) Chokshi Vinodchandra Shantilal, (3) Chokshi Rohitkumar Shantilal, and (4) Chokshi Krishnakant Shantilal on April 10, 1967. The deed of partnership was executed on May 11, 1967. All the four partners are coparceners of the assessee-Hindu undivided family. Chokshi Vinodchandra Shantilal, Chokshi Rohitkumar Shantilal and Chokshi Krishnakant Shantilal are sons of Chokshi Shantilal Keshavlal, karta of the assessee-Hindu undivided family. In other words, the assessee-Hindu undivided family consisted of the father and his three sons. The said partnership firm carried on business in the name and style of Chokshi Shantilal Keshavlal. Chokshi Shantilal Keshavlal, karta of the assessee-Hindu undivided family, has a 40% s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the partnership firm is genuine and directed the Income-tax Officer to grant registration to the partnership firm for the assessment year 1968-69 and to renew the registration for the subsequent years. The Tribunal held that under clause 4 of the deed of partnership, all the partners had agreed to all the debts, assets and stock of the business of the assessee-Hindu undivided family, which were taken over by the partnership firm and under clause 6 of the said deed the net profit or loss of the partnership has to be divided in the manner laid down therein. The Tribunal further held that while Chokshi Shantilal Keshavlal the karta of the assessee-Hindu undivided family, and his son, Vinodchandra, had contributed capital to the partnership-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily. In other words, according to the Tribunal, the 60% share in the income of the said business belonging to Vinodchandra, Rohitkumar and Krishnakant was not includible in the total income of the assessee-Hindu undivided family. The Revenue sought reference and, at its instance, the following two questions have been referred to us for our opinion under section 256(1) of the Act: " 1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the income of the firm of Messrs. Shantilal Keshavlal was assessable in the hands of the assessee-Hindu undivided family to the extent of 40% only ? 2. If the answer to the above question is in the negative whether the share earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances, once the partnership firm is held to be genuine, the shares of Vinodchandra, Rohitkumar and Krishnakant in the income of the partnership business cannot be included in the total income of the assessee-Hindu undivided family. Several authorities have been cited before us on the question whether the coparceners of a Hindu undivided family can become partners with the karta of the Hindu undivided family in a partnership firm. It was urged on behalf of the Revenue that since Rohitkumar and Krishnakant had not made any contribution to the capital of the partnership firm from their own individual property, there was no genuine partnership. It was urged that the partnership firm would not become genuine merely because Rohitku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ily. That was a case in which one Bhojraj who was a partner in a firm, Hemandas Bhojraj, had a share of nine annas in the rupee. The firm, on application made for registration, was registered by the Income-tax Officer. The partners, however, were ordered to be separately assessed on the profits received by them and, when investigating the case of Bhojraj, the Income-tax Officer came to the conclusion that although Bhojraj was a partner in the firm of Hemandas, he was a partner by reason of his utilisation of capital belonging to the joint family of which he was a member. The Income-tax Officer, therefore, did not assess Bhojraj on the share of profits received by him in the business, but he assessed the joint family. The joint family conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue was the decision of the Bombay High Court in Shapurji Pallonji v. CIT [1945] 13 ITR 113. In that case, the assessee who was carrying on business in partnership with his brother introduced his son as a partner in the firm in November 1937, and gave him from his share of ten annas and eight pies, a share of four annas. The firm, as constituted, was registered by the Income-tax Officer in 1938-39 under section 26A of the Income-tax Act, 1922, and assessments were made on the firm and partners accordingly. Subsequently, in the course of reassessment proceedings under section 34 in respect of the assessment year 1938-39, the Income-tax Officer found, while proceeding under section 23(5)(a), that the assessee's son was a mere name-lender a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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