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TMI Blog1929 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ash basis. 3. The Income-tax Officer overruled the objections of the assessee and assessed the assessee on these sums as being foreign profits brought into British India and taxable under Section 4(2). Hence this reference. 4. The contention for the assessee is that, as he got the Taiping business for his share of the joint family, what he got was capital and that he could not be taxed as having received any profits. It is also contended that as the moneys were received by him as a member of the joint family, he could not be taxed, and it is the joint family that should be taxed and not the assessee individually, that under Section 14 of the Income-tax Act he is not liable to assessment, that the fact that the joint family ceased to exist during the year of assessment does not make any difference so far as he is concerned, that there was no provision in the Act for taxing the joint family dissolved during the year of assessment or account, and that this defect has only been removed by Sections 25 (a) and 26 inserted by an amendment of the Act (III of 1928). It is also contended that Section 26 can have no application as the firm is situate outside British India and it is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scope and jurisdiction of the Income-tax officers, and for that purpose the accounts of the foreign firm may be scrutinised. It is not therefore correct to say that in the case of foreign firms whose profits are brought into British India and taxable under Section 4(2), thae other provisions of the Income-tax Act are inapplicable. 10. The next question is whether in the case of partition of an undivided family, the members of which are carrying on business, Section 26 applies, where during the year in question the business falls to the share of one or more of the members. Having regard to the wording of Section 26, I do not see anything to prevent its application. Prior to the partition, all the members of the joint family constituted the firm. By reason of the partition certain members who constituted the firm ceased to have any interest in the firm and their interest by reason of the partition devolved on the person or persons to whom their shares in the business have been allotted. It is difficult to distinguish this case from the case of an ordinary partnership where, there are say, four parties and three of them retire from the business assigning their interest to the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on between the members of a joint family a business as a going concern is allotted to a share of one member. It is not suggested in the present case that, when the business was allotted, the accounts of the business were closed, profits ascertained and such ascertained profits added to the capital and a new business in which this capital was invested was carried on. Nor is it suggested that the business was wound up. The profits remained as profits, the business went on as before and the only change was that instead of all the members of the joint family being interested in the business, one of them acquired the interests of the others and became the sole proprietor. So far therefore as the sum of ₹ 15,037 received by the assessee after the partition is concerned, I am of opinion that it is taxable. 16. As regards the sum of ₹ 20,218 received before the partition, it is not disputed that this sum was received by the joint family of which the petitioner was a member, and it seems to me that having regard to the provisions of Sections 14 and 16 the assessee is not taxable. 17. In a case like the present we should read Sections 4 (2), 14, 16 and 26 together. No doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or partition had taken place, and each member or group of members shall in addition to any income-tax for which he or it may be separately liable and notwithstanding anything contained in Sub-section (1) of Section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; *********Provided that all the separated members and groups of members shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such. 23. In my view the provisions of Sections 14 and 16 being clear and the amendment introduced by Act III of 1928 being much later than the period for which the income has been assessed, no consideration as to the inconvenience or as to any person escaping from taxation can arise. There is no ambiguity in the Sections and the clear meaning of Section 14(1) is that where a member of an undivided Hindu family during the period when the family is joint receives any portion of the income of the joint family, he is not liable to taxation but it is the joint family which under Section 3 should be charged. This is not a case where we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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