ORDER
1. In these cases the assesses is a Hindu undivided family consisting of four brothers, D. D. Kapoor, J. D. Kapoor, K. L. Kapoor & N. K. Kapoor. In the year 1942 the four brothers entered into contract of partnership with two Dalmia brothers, namely, G. R. Dalmia & J. N. Dalmia. The deed of partnership provided that each of the four brothers would have two and a half annas share in
toe profits and losses of the partnership business.
The two Dalmia brothers were granted three annas share each and there was a term in the deed of partnership that the four Kapoor brothers would furnish the skill, labour and goodwill for the partnership business and the two Dalmia brothers would furnish the funds for carrying on the work. The partnership lasted from June 1942 till March 1947. The account of the partnership showed that each of the Kapoor brothers and each of the Dalmia brothers was credited with respective shares of the profit. The profits were credited to the personal account of the partners in the books of the partnership. It also appears that the partners withdraw money from their personal accounts from time to time.
Paragraph 4 of the partnership deed shows the shares of the partners as follows :-
1.
Mr. J. N. Dalmia
As. Three Pies Nil.
2.
Mr. G. R. Dalmia
As. Three Pies Nil.
3.
Mr. K. L. Kapur
As. Two Pies Six.
4.
Mr. D. D. Kapur
As. Two Pies Six.
5.
Mr. J. D, Kapur
As. Two Pies Six.
6.
Mr. N. K. Kapur
As. Two Pies Six.
2. It appears that an application for registration of the firm was made to the Income-tax authorities under Section 26-A. The application was allowed and the firm was ordered to be registered for all the assessment, years. In spite of this fact the Income-tax Officer held that the income derived by the four Kapur brothers from the part-nership was not individual income but should be treated as income of the Hindu undivided family and taxed as such. The reason given by the Income-tax Officer was that the four Kapoor brothers were not partners in their individual capacity bu’t they were only representing the joint Hindu family in the partnership business.
An appeal was taken by the assessee to the Appellate Assistant Commissioner from the order of the Income-tax Officer. The Appellate Assistant Commissioner allowed the appeal holding that the Hindu undivided family was not liable to be tax-ed upon the income derived by the four Kapoor brothers from their shares of the partnership. Against this decision an appeal was preferred by the Income-tax Department to the Appellate Tribunal. The appeal was partially allowed by the Tribunal who took the view that the income of the eldest brother Mr. D. D. Kapoor should be treated as income of a Hindu undivided family but the income of the three other Kapoor brothers was not income of a Hindu undivided family but was individual income.
The Tribunal reached this view because the Tribunal found upon examining the family accounts that the amounts withdrawn by Mr. D. D. Kapoor from the partnership business were credited to the family accounts and treated as family income. As regards the share of income due to the other three Kapoor brothers the Tribunal found upon examination of the account books that the other three brothers had utilised their shares of income, for their own purposes and no part of their income was utilised for the purpose of the family.
3. At the instance of the High Court the Tribunal has stated, a case upon the following question of law:
“Whether in the circumstances of the case, it can legally be. held that the 2 annas 6 pies share of D. D. Kapoor in the income of the
firm is the income of the Hindu undivided family of the Kapoor brothers?”
4. On behalf of the assessee Mr. Dutt put forward the argument that there was no material
before the Tribunal upon which inference could be drawn that the 2 annas 6 pies share of D. D. Kapoor in the income of the partnership was really the income of the Hindu undivided family. The argument of Mr. Dutt is that there was no material before the Tribunal to suggest that Mr. D. D. Kapoor represented the Hindu undivided family for the 2 annas 6 pies share of the partnership shown in his name in the instrument of partnership. It was therefore contended by the learned counsel that the Tribunal was not justified in law in holding that the two annas six pies share of D. D. Kapoor in the income of the partnership should be treated as the income of the Hindu undivided family.
In our opinion the argument of Mr. Dutt is well founded and must prevail. It is important to remember at the outset that there is no pre-sumption in Hindu law that any business carried on by a member of a joint Hindu family is itself a joint family business (see, for example, the decision of the Privy Council in — ‘Annamalai Chetty
v. Subramanian Chetty’, AIR 1S2S PC 1 (A). In the present case the instrument of partnership
definitely shows that each of the four Kapoor brothers was granted 2 annas 6 pies share of the partnership business. The document itself does not expressly state that the Hindu undivided family as such had entered into the partnership business. The only ground given by the Tribunal to support their view is that the income of 2 annas 6 pies share of Mr. D. D. Kapoor, in the partnership business was credited in the joint family accounts.
We do not think that this circumstance is in the eye of law any reason for holding that the in-some of Mr. D. D. Kapoor should be treated as the income of the Hindu undivided family for being taxed. The mere fact that income is entered in the family accounts cannot lead to the inference that the income is joint family income. In order to establish that the income of a Hindu coparcener from the partnership business is joint family income, the Department should produce material to show that the Hindu coparcener had utilised the property or resources of the Hindu undivided family in the partnership business; or the Department should produce material to show that the Hindu coparcener was in fact representing the Hindu undivided family for the share of the partnership he is holding. In the present case the Department has produced no material of either description. The only fact upon which the Tribunal has relied is that the income of Mr. D. D. Kapoor was shown in the joint family accounts. That circumstance in itself is not sufficient to show that Mr. D. D. Kapoor was representing the Hindu undivided family in the partnership:
It was suggested by Mr. Bahadur on behalf of the Department that the income of Mr. D. S. Kapoor from the partnership has been thrown into the joint family funds and there has been a blending
of that income with the joint family income. It
is not necessary for us in this case to express any opinion whether the Hindu undivided family would be liable to pay tax upon the income merely because there has been such blending. We are, therefore, satisfied that in the present case there is no material produced to show that there was blending of the income with the joint family funds. In order to prove the blending of the income with the joint family income it is not sufficient for the Department merely to show that there was physical mixing. In addition, there must be some material to indicate that there was an intention on the part of Mr. D. D. Kapoor to abandon his ownership of the income and to vest the ownership in the joint family. In the present case no such material has been produced on behalf of the Department. In our opinion, the Tribunal has committed an error of law in holding that the two annas six pies share of the income of Mr. D. D. Kapoor derived from the partnership business was the income of the Hindu undivided family and taxable in its hands.
5. The view that we have taken is borne out by several authorities — ‘(see Commr, of Income-tax Madras v. Sanltaralinga Iyer’, AIR 1950 Mad 610 (B); and — ‘Murugappa Chetty & Sons v. Commr. of Income-tax Madras’, AIR 1952 Mad
828 (C).
6. For the reasons we have expressed we think
that in the circumstances of this case it cannot
legally be held that the two annas six pies share
of D. D. Kapoor in the income of the partnership
firm is the income of the Hindu undivided family.
We accordingly answer the question referred to
the High Court in favour of the assessee and
against the Income-tax Department. The assessee
is entitled to the costs of this reference. There
will be one hearing fee of Rs. 250/- for all these
cases.