JUDGMENT
Ojha, J.
1. The following question of law has been referred for our opinion by the Income-tax Appellate Tribunal, Allahabad :
“Whether, on the facts and in the circumstances of the case, the
Tribunal was right in holding that the share income of Sri Gajanand Sutwala from the
partnership firm of M/s. Ganesh Prasad Dalal for the assessment years 1962-63 and
1963-64 was assessable as the income of the assessee-Hindu undivided family
?”
2. The assessee, Sri Gajanand Sutwala, is a Hindu undivided family. Up to
the year 1961-62 the assessment used to be made on the assessee in the status of an
individual inasmuch as he was the sole surviving coparcener. On April 23, 1961,
Sri Gajanand Sutwala, however, adopted Sri Hemant Kumar as his son and his
status thereafter for purposes of assessment has been accepted to be that of a Hindu
undivided family. Sri Gajanand Sutwala was a partner in a firm known as M/s. Ganesh
Prasad Dalai as a representative of the Hindu undivided family. The firm, Ganesh
Prasad Dalai, was on 19th October, 1960, re-constituted and a deed of partnership
was executed on the date. Under the said deed, the various Hindu undivided families
which were partners before the said date, ceased to be partners and one representative
of each family was taken as a partner. In the case of the assessee, Sri Gajanand
Sutwala continued to be a partner in the reconstituted firm. For the assessment years
1962-63 and 1963-64, the assessee did not show in his return the share
income from the firm, Ganesh Prasad Dalai, on the ground that the said income
belonged to Sri Gajanand Sutwala exclusively. The plea of the assessee in this behalf
was repelled by the Income-tax Officer and an assessment was made treating the
share income of the said firm as belonging to the Hindu undivided family. The
order of the Income-tax Officer in this behalf was upheld by the Appellate Assistant
Commissioner as also by the Income-tax Appellate Tribunal. The Tribunal in its
order dismissing the appeal filed by the assessee held :
“From the facts stated above, it is evident that in the case before us
the share in the name of Sri Gajanand Sutwala in the partnership business styled
Ganesh Prasad Dalai was a joint family ancestral property. ….. There is admittedly
no family arrangement or partition amongst the members of the family justifying the
enjoyment of the share of profit from the partnership business by the karta
exclusively. ….. Since the facts in
this case show that this change in character was claimed neither on the basis of family
partition nor could it be justified as the measure in the interest of the family we have
no hesitation in holding that whatever may be the language used in the deed of
partnership, the same would not change the beneficial ownership of the Hindu
undivided family….. Having regard
to all these facts we hold that the share of profit or loss of the partnership business of
Ganesh Prasad Dalai in the name of Sri Gajanand Sutwala continues to belong to the
assessee family.”
3. From a perusal of the deed of partnership dated October 19, 1960) it would
appear that the capital of the Hindu undivided family remained in the firm, Ganesh
Prasad Dalai, but the firm agreed to pay six per cent. interest to the Hindu
undivided family on those funds. It has not been suggested that 6 per cent. interest
on unsecured advance was at all appropriate or adequate. Sri Gajanand Sutwala did
not contribute any capital of his own, nor did he contribute anything else by virtue of
his being a working partner or otherwise. The funds of the Hindu undivided family
with the firm thus constituted the capital for Sri Gajanand Sutwala Ho continue as a
partner of the reconstituted firm by the deed dated October 19, 1960. The income
which Sri Sutwala received was thus directly related to the utilization of the family
assets. In fact it accrued with the aid of the said assets, and the family suffered
detriment in the process of realization of such income. Under these circumstances the
share income would obviously belong to the joint Hindu family. See Raj Kumar Singh
Hukam Chandji v. Commissioner of Income-tax.
4. Accordingly, our answer to the question referred to us is in the affirmative,
in favour of the department and against the assessee. The assessee will pay Rs. 200 as
costs. The fee of the counsel is assessed at the same figure.
Question answered in the affirmative.