Vimadalal, J. - In my opinion, this Reference raises a pure question of fact into which we are not entitled to go. The Tribunals view in regard to the same being binding on us, the question propounded on this Reference must be answered against the assessee. The question before us is not whether mere book entries can effect particular in law. The question, as framed disguises the real question that arises in this Reference which is, whether there is satisfactory evidence to prove the alleged partial partition. That is purely a matter of appreciation of evidence from which a conclusion of fact would have to be drawn one way or the other. The tribunal has arrived at its own conclusion in regard to that same in paragraph 7 of its order dated 21st April, 1965. Its conclusion is that there is 'no satisfactory evidence of any partial partition', and that conclusion is set out in paragraph 11 of the Statement of the Case. Though no such question has been referred to us, it may be stated that the Tribunals conclusion on that point cannot be said to be perverse. In fact, it appears to ne to be a correct conclusion, but, as this Court is not concerned with question of fact, I would answer the question referred to us against the assessee without going into the merits. I am somewhat surprised that Mr. Dastur should have persisted in arguing this Reference at some length as if it was an ordinary appeal on facts. I do not propose to discuss the authorities cited before us by Mr. Dastur, as the decision of a question of fact cannot be governed by authority.
2. In deference to Mr. Dastur who has argued the Reference at some length, my brother Desai will, however, deal briefly with his argument and with the authorities cited by him.
Per Desai J. - I am in full agreement with what has been stated by my brother Vimadalal. However, as indicated by him, I propose to deal, though briefly, with the rather lengthy arguments which have been advanced on behalf of the assessee in this Reference.
4. We are concerned in this Reference with assessment years 1958-59 to 1962-63. The question which has been framed by the Tribunal and submitted for our consideration at the instance of the assessee under sec. 66(1) of the Indian Income-tax Act, 1922 and section 256(1) of the Income Tax Act, 1961, is as follows :-
'Whether, on the facts and in the circumstances of the case, the sums of Rs. 11,064/-, Rs. 12,426/-, Rs. 11,934/-, Rs. 12,366/- and Rs. 13,893/-, being interest amounts for the five successive years in question on the sum of rupees three lakhs have been validly treated as the income of the assessee HUF ?'
5. As indicated by my brother Vimadalal, the question as formulated by the Tribunal disguises the real question but before indicating the same, I will briefly set out the facts which are to be found in the Statement of Case submitted by the Tribunal.
6. The assessee in this case is the HUF Hargovinddas Ugarchand represented by its Karta Chimanlal Hargovinddas. The HUF represented by Chimanlal was one of the three partners of the firm called Messrs. Hakamchand Ishwardas. During the relevant years it is the admitted position that the HUF consisted of Chimanlal, his two younger brothers Mohanlal and Natwarlal and the wives and children of the said three brothers. On 9th January, 1956 in the books of the said firm an amount of Rs. 4,77,000/- stood to the credit of the capital account of the HUF (as represented by Chimanlal). On that day certain entries were made in the firms books by which entries there was a debit of Rs. 3 lakhs to the capital account and the credit of Rs. One lakh each to the three individual and independent accounts in the names of Chimanlal Mohanlal and Natwarlal respectively. There were further recitals in the entries in these new accounts of three brothers. The entry in the new account of Chimanlal stated that 'as per your direction, under mentioned amounts have been given to' and here follows the names of the wife of Chimanlal who, according to the entry had been given Rs. 30,000/- and the names of the two sons of Chimanlal, who according to the entry had been given Rs. 35,000/- each. Similar entries in the new account of Mohanlal stated that as per his direction Rs. 20,000/- were given to each of his 3 sons, Rs. 20,000/- to his wife and Rs. 10,000/- each to the two sons of the remaining son of Mohanlal named Jayantilal (Jayantilal being totally excluded from the distribution.) As regards the now account of Natwarlal who, it appears, had no issue the entry stated that the amount of Rs. one lakh was divided equally between himself and his wife. The HUF also maintained its own books, and its capital account at the material time showed the amount of Rs. 5,91,548/-, which apparently included the capital amount shown in the books of the firm in which the HUF was a partner. On 9th January, 1956 the books of the HUF showed withdrawal of the amount of Rs. three lakhs from the capital account and then various entries were made which corresponded to the entries in the firms books showing the element of distribution or division of the amount to the brothers, their wives and the children as indicated earlier. The position after 9th January, 1956 for the firm was that the share of profits as such of the HUF in the partnership was credited to the capital account which contained in the name of Hargovinddas Ugarchand (represented by the Karta, Chimanlal), but the newly opened individual accounts were credited with interest. The contention advanced on behalf of the HUF before the Income-Tax Officer was that there was (a) partial partition in which the said asset of Rs. three lakhs was partitioned and the same did not any longer constitute property of the HUF and therefore, the amounts credited to the respective individual accounts as and by way of interest could not be included in the total income of the HUF. The Income-tax Officer did not accept this contention for the assessment year 1958-59 and the assessment orders or the remaining four years merely followed the reasoning of the Income-tax Officer for the assessment year 1958-59. Being aggrieved by these orders the assessee went in appeal to the Appellate Assistant Commissioner, who accepted the contentions of the assessee and set aside the orders of the Income-tax Officer. It was the Department then which appealed to the Tribunal for all the years in question. The Tribunal observed that 'as the entries stand and giving full effect to the entries in the books of the HUF, there is yet no satisfactory evidence of a partial partition as such'. The Tribunal further observed.
'It is not clear how after the amount of Rs. 3 lakhs was permitted to be withdrawn from the capital by the firm, the profits were shared between the partners of the firm. The firms capital and the contribution by the HUF to that capital are inextricably mixed, and yet no explanation has been forthcoming as to how the firm could permit withdrawal of any portion of the capital. It is, therefore, difficult to say only on the strength of the evidence which has come to us that there was a partial partition in respect of an asset of the HUF by withdrawing it from the capital of the firm. The entries in the firms books, therefore, cannot be held to support the theory of the partial partition.'
7. The Tribunal thus came to the conclusion that the decision given by the Appellate Assistant Commissioner in favour of the assessee was wrong. It allowed the Departmental appeal and restored the decision of the Income-tax Officer regarding inclusion of interest amounts in the total income of the assessee.
8. Considering the way in which the question has been formulated by the Tribunal, Mr. Dastur during the course of his arguments has even attempted to urge that all that was necessary for the assessee was to show that the amounts had gone out from the HUF. It was submitted in the second place that the Tribunal was in error in holding that there was no valid partial partition qua this amount of Rs. three lakhs. Finally, it was no partial partition was contrary to the evidence or based on no evidence and was a view which no reasonable Tribunal could have arrived at on the evidence on record.
9. As far as the first head of the argument indicated above is concerned it is quite clear to me that this argument has been sought to be developed for the first time in the court. It cannot be permitted to the assessee to urge that the amounts had gone out of the family funds either on partition or on a different footing, whatever that footing may be, and therefore the decision of the Income-tax Officer to include the amounts of interest in the income of the assessee was erroneous. The assessee came before the Income-tax Officer on a specific footing viz., that there was a partial partition qua the amount of Rs. 3 lakhs and the amounts of interest earned on the aggregate amount of Rs. 3 lakhs thereafter could not be charged with tax in the hands of the assessee. In my opinion, the assessee cannot now be permitted to argue this question on a different footing.
10. Further, the submission that the Tribunal has rejected the case of the assessee on the footing that there was no valid partial partition appears to me to be a mis-statement of what the Tribunal has held. It is not the finding of the Tribunal that there has been a partial partition in fact or a purported partial partition which is legally ineffective and therefore invalid. This could have been deemed to be the finding of the Tribunal of Rs. 3 lakhs sought to be made the subject matter of a partial partition was one which could not be partitioned or partially partitioned in law. It is not the view of the Tribunal that a partial partition could not be effected by book entries and was required to be effected by a separate documents or in some manner other than by mere book entries. It is also not the conclusion of the Tribunal that the partial partition purported to be made was invalid or ineffective in law as the subsequent division between the wives and the issues of three brothers was not in accordance with the rights of the several co-parceners as recognised by Hindu Law. What the Tribunal has found is that the contention of partial partition must therefore fail on the facts.'
11. It was urged by Mr. Dastur that none of the factors which were considered by the Tribunal in arriving at this finding could be regarded as ones which would destroy the assessees case of a partial partition. Again, to me the approach was a fallacious one. The Tribunal has not regarded any of these factors or reasons given by it as conclusive or determinative of the question one way or the other. What the Tribunal has done is to set down various factual aspects of the matters, indicate its difficulties in accepting case of the assessee bearing those factors in mind and concluding ultimately that in this evidence on record it was not satisfied that there was a partial partition in respect of the amount of Rs. 3 lakhs. I will briefly indicate the factors which, according to Mr. Dastur, the Tribunal wrongly appreciated as being contra indicative of the factum of partition : Firstly, it was sought to be urged that the entries were in two stages, the first providing for a division between the three brothers Chimanlal, Mohanlal and Natwarlal, and the second stage providing for individual credits to the accounts of wives and sons of these three (including sons of one of them viz. Jayantilal). According to Mr. Dastur, if the first stage alone was considered, there was a clear indication that there was a division of the amount between Chimanlal Mohanlal and Natwarlal, which would go a long way to establish or corroborate the case of a partial partition. Now, the recital in this entry (ignoring for the time being the subsequent entry) is that the amount is divided or distributed. Even considering this entry by itself, there is no clear or unequivocal reference to any partition or a partial partition. Further, it appears to me that the approach of the Tribunal cannot be regarded in any way as erroneous when it says that it would not be proper to ignore the subsequent entries and that the transaction must be taken as a whole. The entries are made not only on the same day but at the same time. Considering the second stage, then the Tribunal observes that these entries by themselves were not satisfactory evidence of any partial partition as such. It is impossible in my opinion to find fault either with the general approach or with the conclusion of the Tribunal to be found in para 7 of its appellate order in this connection.
12. In para 8 of the said order the Tribunal made comments on the fact how the amount of Rs. 3 lakhs was permitted to be withdrawn from its capital by the firm and it also expressed some difficulty by reason of the fact that it was not clear how the profits were shared between the partners thereafter. According to the Tribunal the entries in the firms books also could not be held to support the theory of a partial partition. Certain comment was made by Mr. Dastur on the portion in the order of the Tribunal where it is observed that besides the entries there was no other instrument effecting or documentary proof regarding partial partition. The Tribunal has further observed that the transaction was one which could have various effects. It is difficult, in my opinion to say that there is anything basically fallacious or absurd about the approach of the Tribunal in the matter of its assessment of the question whether the assessee had satisfactorily proved its case of a partial partition. It cannot be gain said that all the aspects pointed out by the Tribunal had some relevance for the issue. The Tribunal has not held any of these as determinative of the question but on consideration of the overall effect has held against the assessee. What Mr. Dastur has really sought to urge in this Reference is to persuade us to come to the conclusion, that the Tribunals decision on the facts was erroneous which, in my opinion, we are not entitled to do in our limited jurisdiction under section 66 of the Indian Income-tax Act, 1922 and section 256 of the Income-tax Act, 1961.
13. I shall now briefly deal with some of the authorities cited by Mr. Dastur. Broadly speaking they are of no relevance in this Reference as the Tribunal in the case before us has not decided against the assessee on the question of legal infirmity of the alleged partial partition as distinguished from lack of satisfactory proof thereof.
14. In C.I.T., Madras was at the instance of Revenue and it was sought to be urged that as a matter of law there could not be a partial partition of certain assets by means of book entries. It is this argument which has been decisively rejected by the High Court in the said decision and the High court was satisfied on the facts which was also the finding of the Tribunal in the Madras Case that there was a partial partition of the assets with the necessary entries being made in the capital accounts of the three members. I fail to see how the said decision has any bearing on the facts arising before us.
15. In Moti Lal Shyam Sunder vs . Commissioner of Income-tax, U.P. : 84ITR186(All) , the Tribunal had held that partition of a part of assets could not be envisaged in law and as in its view a part of the assets had not been the subject matter of the partial partition, the partial partition claimed was invalid in law. In the Reference the High Court was therefore, considering the legal validity of the partial partition which had been urged by the assessee and there was no occasion to consider the factual sufficiency of evidence of that partition. The Allahabad High Court in Moti Lals case found that there was an error of law in the approach of the Tribunal and, therefore, decided the reference in favour of the assessee.
16. In A. Kuppiah Mudaliar vs . Commissioner of Income-tax, Madras, : 63ITR522(Mad) , the Madras High Court was considering a case where a partial partition had been effected but no physical division of the assets concerned had taken place. It was observed that physical division on partial partition in respect of an item of joint family property could be insisted upon only where such division is practicable otherwise allotment of shares should be regarded as sufficient. This decision also cannot really help Mr. Dastur.
17. Our attention was drawn by Mr. Dastur to A. Kannan Chetty vs . Commissioner of Income-tax, Madras, : 50ITR601(Mad) , where it has been observed : 'The income-tax law certainly does not prohibit partition of a joint family' and that 'so far as the taxing Department is concerned it is not in all cases open to it to question the legality or validity of transaction entered into by a member of a joint Hindu family or the Karta thereof'.
18. In Kannan Chetty's case it was held that the unequal partition which had in fact been effected was only voidable and not void ab-initio. It is important however, to note that in Kannan Chetty's case the High Court was again considering the validity of a partition and not the factum thereof and it has in fact been observed in that decision that the properties possessed by a joint Hindu family at any point of time is a question of fact which has to be determined and which will vary from time to time. It is true that in the case before us the Tribunal has pointedly drawn attention in its order to the fact that Jayantilal was totally excluded from the subsequent division. It has however, not held that by reason of such fact that purported partial partition became invalid in law. Kannan Chetty's case, therefore, can be of no assistance in considering the present Reference.
19. Our attention was finally drawn to T. G. Sulakhe vs . Commissioner of Income-tax, Hyderabad & Andhra Pradesh, : 39ITR394(AP) where it has been emphasised by the High Court of Andhra Pradesh that in deciding whether there has been a partition in a Hindu undivided family, the motive for partition is immaterial if the members of the joint family in fact intended to separate, nor is the fact that the partition is unequal a conclusive consideration. It was further observed that even where the members of the joint family avow openly that the motive or partition is to escape the incidence of income-tax and to obtain benefit which the law affords them in the case of a partition, it cannot, merely because of such motive, be declared that the partition has not taken place or was not intended. In our case the Tribunal has not regarded the fact of inequality as conclusive and determinative of the factum of partition. This case therefore is also of no assistance to Mr. Dastur. In fact, the view of the Andhra Pradesh High Court that this factor is not conclusive would seem to suggest very clearly that the factor of inequality is a relevant factor and would be required to be considered along with other pieces of evidence in finding out whether there was in fact a partial partition of certain assets as alleged by the assessee.
20. It is clear to me that upon various pieces of relevant evidence and circumstances the Tribunal has come to the conclusion, which is patently a conclusion of fact, that the assessee has not satisfactorily proved that there was a partial partition. In a reference under section 66 as also in the under section 256 such finding is binding on us. It is impossible to say that the conclusion or the finding of the Tribunal is contrary to evidence or based on no evidence at all or is perverse in the sense that it is a finding which no reasonable Tribunal could have arrived at. In this view of the matter, the question will be required to be answered against the assessee.
By the Court : The question referred to us is answered as follows :
22. The Tribunals decision on facts being binding upon us, on the facts and in the circumstances of the case, the sums of Rs. 11,064/-, Rs. 12,426/-, Rs. 11,934/-, Rs. 12,366/-, and Rs. 13,893/- being interest amounts for the five assessment years in question on the sum of Rupees three lakhs have been properly treated as income of the assessee HUF. No question of validity arises out of the order of the Tribunal in respect thereof.
23. The assessee must pay to the Commissioner the costs of this Reference.