Narayana Pai, J.
1. The question referred in this case pursuant to an order made by this court under section 66(2) of the Indian Income-tax Act, 1922, is :
'Whether, on the facts found by the Tribunal, it is justified in law, in holding that profit of Rs. 12,959,09 in the cloth transaction, under the contract dated December 3, 1958, entered by the assessee with Messrs. Suratram Gopaldas, firm of Bombay was the profit in the hands of the Hindu undivided family ?'
2. The assessee, Seth Chunilal Parsram was being assessed in his capacity as karta of the Hindu undivided family consisting of himself and his three minor sons, the principal source of whose income was money-lending business. Although there was at one stage an attempt by the assessee to give it the character of a separate business carried on by him with money borrowed from the family, to the relevant details of which we shall refer presently, there is no dispute at present that the money-lending business was and continued to be, right up to the year relevant to the assessment now under reference, joint family business. The cloth business mentioned in the question was carried on by the assessee under or pursuant to a contract of 3rd December, 1958, between himself and a Bombay firm Suratram Gopaldas. It is also the concurrent finding of all the authorities including the Tribunal that no part of the family funds was utilized for carrying on the said cloth business. The said entire amount of Rs. 12,959.09 was received in one lump by the assessee from the Bombay firm along with their account statements, and was straightaway credited in one lump to the individual capital account in the name of the assessee in the books of account. The books of account are books maintained in connection with the family money-lending business. The individual capital account of the assessee referred to above, is a ledger title in the said account. The other members of the family are, as already stated, the minor sons of the assessee. It is not the case that they had anything to do with the cloth business or that the said cloth business may be regarded as a joint venture by all the members of the family.
3. So far, there is no controversy whatever. Prima facie, upon these facts, the ordinary presumptions of law as well as natural inference should be that in carrying on the cloth business, the assessee was acting in his individual capacity and on his own behalf. The normal presumption also is that an acquires for his own benefit such being human nature unless by reason of association, affection, long-standing conduct or practice, the acquisition by a member may be regarded as an acquisition made for and on behalf of the joint family.
4. It is, of course, open to a manager of a joint family either to work on behalf of the family, or carry on business on behalf of the family and also to blend with the joint family property moneys or properties which were undoubtedly his own separate properties. But that is a matter of proof depending upon close investigation of the facts. But one circumstance which may be regarded as a weighty consideration is the principle of Hindu low that, although an ancestral trade may be carried on by a manager so as to bind the interests of minor members also, it is not him to start a new business and expose the interests of the minor members to the risks and liabilities arising out of such new business.
5. Such being the general features of the admitted facts of this case and the principle of law which should normally apply thereto, the only question is whether on the said facts the Tribunal can be said to have come to a correct conclusion on an application of the correct principles of law.
6. The Tribunal accepted in toto the line of reasoning adopted by the Appellate Assistant Commissioner adding thereto no fresh reasoning but only further emphasis. The background of the facts on which both depended may be briefly summarized as follows :
7. The assessee, it appears, originally belonged to a Hindu undivided family resident in a territory which has since become part of Pakistan. In 1948, the assessee came down to India carrying with him more than Rs. 80,000 allotted to him at a partition between him and other members of the family It is with this money that he started a money-lending business in Bombay, the venue of which he later shifted to Bangalore. It would appear that in addition to what he had acquired at the partition, he also received some large gifts from elderly ladies related to him. A total sum of Rs. 33,848-22 being the value of the said gifts, was directly credited by him to the capital account of the family in the books of account maintained in connection with the family money-lending business. But, in October, 1957, he split up the capital account into two, one relating to the family as a whole, and the other relating to him alone as an individual, and to the latter account he carried the full value of the gifts mentioned above viz Rs. 33,848,23.
8. It would appear that at a later stage the assessee propounded a theory that the money-lending business was carried on by himself as an individual with money borrowed from the joint family and thought that the proper thing to do for him was to credit the family with interest on the moneys borrowed from the family and himself appropriate the profit arising out of the money-lending business treated as his individual business. This profit he carried to his personal or individual capital account. This theory was rejected by the income-tax department. Whether the rejection was right or wrong, the assessee accepted it with the result that he transferred from his individual capital account the profit for the accounting year 1958-59 amounting to Rs. 5,648.79 to the capital account of the undivided family.
9. The department also appears to have refused to accept the position that the gifts are his individual property. For this their reason was that at the moment he put the value of the gifts in the first instance as a credit in the capital account of the family, the gifts became merged with the capital of the family business. Here again, whether the view taken by the department was right or wrong, the assessee appears to have accepted the same and acted upon it.
10. In the course of the returns made for made for the assessment year now in question, the assessee had originally filed two returns, one on behalf of his family and another in his individual capacity acting upon his theory of money-leading business being his own as stated by him. In view of the opinion expressed by the department in the immediately proceeding year, he reversed the entries as stated above and filed fresh rectified returns in which he showed the profit arising out of the Bombay cloth business alone as his income in his personal return and all other items as income of the undivided family.
11. It is upon these facts that both the Appellate Assistant Commissioner and the Tribunal seem to think that the normal presumption of law as stated by us is not available in this case.
12. The Appellate Assistant Commissioner seems to think that the assessee has been juggling with the accounts and that his sole motive was to escape tax liability. The Tribunal, though it used milder language, seems to be of the same view. They have, however, given what appears to be a little more logical line of reasoning. They state, in our opinion rightly, that when the assessee agreed that the amount of the gifts should also be treated as belonging to the family and that the entire money-lending business was that of the family as a whole, the assessee could not assert that he had any separate funds of his own. Secondly, they state that the mere fact that the profit from the cloth business was credited to the individual capital account of the assessee cannot be regarded as conclusive. Here again, the Tribunal cannot be said to have made any particularly inaccurate statement.
13. But, the error into which the Tribunal fell was the view that the mere fact of the profit from cloth business having been credited in one of the pages of the books of account maintained for the family was sufficient to wipe out the legal effect or other proved and admitted facts.
14. Among the proved facts, the most important fact is that no part of the funds of the family had been utilised for the cloth business and no member of the family except the assessee alone had expended any effort or labour in connection with the said cloth business. The cloth business was not an ancestral business of the family, but a new business started by the assessee. In these circumstances, the prima facie presumption, according to Hindu law, must be that the cloth business was the separate business of the assessee and the profits thereof his separate earnings.
15. If, as the Tribunal states, the crediting of the money to the individual capital account of the assessee was inconclusive and if, as the Appellate Assistant Commissioner observes, it is difficult from the accounts to decide the exact nature of the proprietorship, then the result must be that there is nothing in the material placed before the Tribunal to displace the normal presumption law.
16. It, however, appears to us that even on the facts depended upon by the departmental officers, whose view has been accepted by the Tribunal, the inference, if any, should have been in favour of the assessee and not against him.
17. As a matter of law it should be stated that blending of private properties with those of the family is not a matter of account writing but of the intention of the acquirer. If, as the Tribunal observes, the accounting entries are inconclusive, then they cannot be accepted as to any extent modifying or qualifying the normal intention which the acquirer may be said to entertain of acquiring for himself. On the other hand, the circumstances in which the assessee came to open what is called his individual capital account clearly indicate that the said account was intended by the assessee to take in what he considered to be his separate moneys. Hence, if any inference at all can be drawn, or is possible of being drawn with reasonable certainty, the inference should be that the act of entering any item of money in the individual capital account excludes any intention on the part of the assessee to blend his private moneys with joint family funds.
18. We are, therefore, of the opinion that the inference drawn by the Tribunal from the facts accepted by it is not an inference which would have been reasonably drawn upon a judicial consideration of the facts in the light of the law applicable thereto. The finding, therefore, though apparently one of fact, must be regarded as a finding vitiated by an error of law.
19. Our answer to the question referred, therefore, is that on the facts found by the Tribunal, it was not justified in law in holding that the profit of Rs. 12,959.09 in the cloth transaction under the contract dated December 3, 1958, entered by the assessee with Messrs. Suratram Gopaldas, a firm of Bombay, was the profit in the hands of the Hindu undivided family of which the assessee is the karta.
20. The assessee will have the costs of this reference. Advocate's fee Rs. 250.