9911796707
TMI Blog1979 (11) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... On November 2, 1961, each of the four sons of Smt. Krishan Piari Khanna withdrew Rs. 6,250 from the business accounts of the family by cheques. These amounts were invested by them as their share capital in the partnership business which they started under the name and style of M/s. Modern Optical and Surgical Industries, near Ghaziabad. The firm also obtained a site belonging to the HUF on a yearly rent of Rs. 1,500 and set up the factory where manufacture of optical goods and steel furnitures was started. In the balance-sheet dated March 31, 1963, of the HUF, which was signed by R. K. Khanna, the withdrawals of those Rs. 6,250 by each of the brothers were described as under : " Advances made to the members of the HUF are in the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly property, it must partake of the joint family character. In appeal, the AAC confirmed this assessment observing that there was detriment to the family funds and, therefore, the income enjoyed on utilisation of money withdrawn therefrom had to be attributed to the family. He declined to accept the contention of the assessee that the with each of the four brothers on November 21, 1961, from the HUF, amounted to partial partition, inter se, to the extent of Rs. 25,000. In this regard, it was observed that the capital account of the HUF was not debited. Instead the accounts of the four brothers were debited by a sum of Rs. 6,250 each. He further noted that no claim for recognition of partial partition was lodged before the ITO under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was prepared of the affairs of the HUF, there was a clear narration that those amounts were advances made to the members of the family in the nature of loans and no interest was being charged. At the stage of assessment also the initial stand taken was that those withdrawals constituted loans simpliciter to the four brothers by the HUF. These contemporaneous expressions of the nature of withdrawals were significant and left little doubt that at that time the family and the four brothers were treating those withdrawals as mere loans. Any subsequent stand taken by them, after the lapse of some years, could not convert those loans into a partial partition. Rather we find that this case of partial partition has no legs to stand on. Smt. Kris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to the investment in the partnership business from the assets of the family and there was real and sufficient connection between the investment of the family funds and the remuneration enjoyed. The salary paid to the karta was, therefore, held assessable as income of the HUF. Before an acquisition by the karta of the HUF, can be claimed to be his separate property, it was observed, it must be shown that it was made without any aid or assistance from' the ancestral or joint family property. In a later decision, in the case of Raj Kumar Singh Hukam Chandji v. CIT [1970] 78 ITR 33, the Supreme Court observed that in determining whether the remuneration received by an individual is the income of the individual to whom it is purported to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a firm in his capacity as karta. On his death, his three minor sons were admitted to the benefits of the partnership in that firm. The capital of HUF standing in the account of the deceased in the firm was continued to be utilised by the firm free of interest. The question arose whether the share of the profits allocated to the three minor sons belonged to the family and was to be assessed to income-tax in its hands. It was held that the induction of the three minors to the benefit of the partnership was with the tacit assent and agreement on the part of their widowed mother representing the family and that the quid pro quo for admitting the three minor sons to the benefits of the partnership was the continued use, free of interest, of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot essentially be said that the income belongs to the HUF. At the same time, the existence of the joint family nucleus, and whether there has been any detriment to the interest of the HUF funds cannot be altogether ignored. This concept of the Hindu"law is not without purpose and significance. It provides a safeguard and protection to other family members from possible mischief or injury to their interest. A karta or any influential adult coparcener may start a new business with family funds, and after asserting that the operation of the business involved his personal efforts and skill, deprive the minors and females who may have a right of share in the funds and income of the family, the benefits thereof. The judicial pronouncements have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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