1. This case has been stated by the Income-tax Appellate Tribunal as directed by this court.
2. The relevant facts are that Motilal Jain is a karta of the Hindu undivided family known as ' Khubchand Motilal of Seoni' (hereinafter referred to as 'the assessee'). He has six sons. No partition of the Hindu undivided family assets has taken place and all the members of the family are staying jointly. Rajendra Kumar is an adult coparcener of the family. He entered into a partnership with one Gulabchand Sohaney in the business, known as ' Rajendra Medical Stores ' for which a partnership deed was executed on September 1, 1958, and both the partners agreed to share the profits and losses equally. The terms of the partnership were that Rajendra Kumar would invest up to Rs. 20,000 in the beginning of the business and if further amount would be required, Rajendra Kumar will manage for the same. The investment by Rajendra Kumar would carry an interest at 71/2 per cent. per annum. Besides that, Rajendra Kumar will get Rs. 50 as rent for the shop at Budhwari Bazar, Seoni. Rajendra Kumar did not have any money of his own. The assessee provided the funds from September 3, 1958, to November 8, 1958, amounting to Rs. 22,919. Gulabchand Sohaney made no investment and he was allowed to withdraw from the partnership Rs. 100 to Rs. 125 per month for his personal and household expenses. There was also an account of the assessee, Hindu undivided family, in the books of the firm. For the assessment year 1960-61 the Income-tax Officer held the income falling tothe share of Rajendra Kumar from the partnership as the income of the Hindu undivided family and taxed the same accordingly. For the following subsequent three assessment years, 1961-62, 1962-63 and 1963-64, also the share income of Rajendra Kumar from the firm was held taxable in the hands of the Hindu undivided family. The assessee remained contended after dismissal of his appeals in respect of these three years by the Appellate Assistant Commissioner. But when for the assessment year 1964-65, an amount of Rs. 14,700, the share income of Rajendra Kumar from the partnership firm, was again included in the assessment of the Hindu undivided family (assessee) by the Income-tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner, who remanded the case to the Income-tax Officer with a direction to record the statement of Rajendra Kumar and of the karta of the Hindu undivided family.
3. The Income-tax Officer submitted to the Appellate Assistant Commissioner a remand report dated September 15, 1965, after recording the statements of Rajendra Kumar and Motilal. The Appellate Assistant Commissioner held that as the assessee was receiving interest on the amounts invested in the firm, there was no detriment to the family properties. As the Hindu undivided family had provided the funds for the necessary investment, it could not be held that Rajendra Kumar was the benamidar of the assessee-firm. He accordingly directed that the share income of Rs. 14,700 of Rajendra Kumar should be excluded from the total income of the assessee, Hindu undivided family. The department went up in second appeal before the Appellate Tribunal against the said order. The Tribunal found that the very fabric of the business of M/s. Rajendra Medical Stores came into existence by use of the family funds by the assessee; that Rajendra Kumar has not separated from the assessee-family and that, though Rajendra Kumar had withdrawn monies from his account for expenses, this could not be considered to be the alienation of family funds by the karta of the assessee-family made without legal necessity. Having regard to these and all other surrounding circumstances, such as the fact that right from the commencement of the business of the firm the premises had been provided by the assessee-family, the Tribunal held that the income consisting of the share in the firm of Rajendra Kumar really belonged to the assessee-family. Thus, the Tribunal rejected the contention of the assessee, set aside the order of the Appellate Assistant Commissioner and restored the assessment order while allowing the departmental appeal.
4. The assessee applied to the Tribunal for referring the case to this court. As it failed to do so, it made an application to this court under Section 256(2) of the Income-tax Act, 1-961. After hearing the department.this court required the Tribunal to state the case and refer the following question:
' Whether, under the facts and circumstances of the case, the Tribunal was right in finding that the share income of Rs. 14,700 earned by the coparcener, Shri Rajendra Kumar, from the firm, M/s. Rajendra Medical Stores, was in law and in fact income of the Hindu undivided family of Khubchand Motilal and whether the said income was rightly included in the income of the said Hindu undivided family for purposes of taxation '
5. The Tribunal has now in accordance with the aforesaid direction and the provisions of Section 256(2) of the Income-tax Act, 1961, drawn up an agreed statement of the case and submitted it to this court.
6. Before us, learned counsel for the assessee contended that there is no restriction on a coparcener for starting his own business. The family had only lent money in the ordinary course of business to Rajendra Kumar and that lending could not be construed as an investment of the Hindu undivided family. On the advance made, the Hindu undivided family was getting 71/2% interest and the same was declared in the return filed. He further submitted that the only conclusion possible on consideration of the facts is that the income derived by Rajendra Kumar from M/s. Rajendra Medical Stores was his in his individual capacity and not that of the Hindu undivided family. On the other hand, learned counsel for the department contended that the business of M/s. Rajendra Medical Stores owed its existence due to the funds provided by the assessee. There was nexus between the funds provided by the assessee and the income earned by Rajendra Kumar from the said firm. Therefore, the income from the firm belonged to the assessee. Even the business premises where the business of the firm was carried on belonged to the assessee. In a nutshell, he contended that the share income of Rajendra Kumar was rightly held as income of the Hindu undivided family by the Tribunal on the basis of the evidence on record and it is a finding of fact and as such reference could not lie.
7. Before we deal with the respective submissions advanced, it would be better to point out that the principle of burden of proof in such cases that the income is the income of the Hindu undivided family and not of the member is upon the department and the Tribunal rightly proceeded on that basis in deciding the assessee's appeal. We are supported in our view by a decision of this court in Jainarayan Balabakas of Khamgaon v. Commissioner of Income-tax . In Annamalai Chetty v. Subramanian Chetty AIR 1929 PC 1. their Lordships observed as under :
'A member of a joint undivided family can make separate acquisition of property for his own benefit, and unless it can be shown that the business grew from joint family property, or that the earnings were blended with joint family estate, they remain free and separate.'
8. In P. N. Krishna Iyer v. Commissioner of Income-tax, their Lordships of the Supreme Court observed as under :
'Income received by a member of a Hindu undivided family from a firm or a company in which the funds of the Hindu undivided family are invested, even though the income may be partially traceable to personal exertion of the member, is taxable as the income of the Hindu undivided family, if it is earned by detriment to the family funds or with the aid or assistance of those funds ; otherwise it is taxable as the member's separate income.'
9. In V. D. Dhanwatey v. Commissioner of Income-tax, : 68ITR365(SC) , who was the karta of a Hindu undivided family, was a partner of a firm. His contribution to the capital of the firm belonged to the family. Interest was payable on the capital contributed by each partner. Under Clause (7) of tbe deed of partnership the general management and supervision of the partnership business was to be in the hands of V. Under Clause (16) he was to be paid a monthly remuneration out of the gross earnings of the partnership business. The question was whether the salary received by V was assessable in the hands of the Hindu undivided family. It was found that V was in the partnership as representing the family and he became a partner on account of the investments of joint family assets in the capital of the partnership and that the remuneration received by V was only an increased share of the profits paid to him as representing the family. It was held that remuneration paid by the firm to V was directly related to the investment in the partnership business from the assets of the family. There was real and sufficient connection between the investment from tbe joint family funds and the remuneration paid to V. The salary paid to V was, therefore, assessable as income of the Hindu undivided family. In Raj Kumar Singh Hukam Chandji v. Commissioner oj Income-tax, : 78ITR33(SC) their Lordships of the Supreme Court laid down the following tests;
'(1) Whether the income received by a coparcener of a Hindu undivided family as remuneration had any real connection with the investment of the joint family funds ;
(2) Whether the income received was directly related to any utilisation of family assets;
(3) Whether the family had suffered any detriment in the process of realization of the income ; and
(4) Whether the income was received with the aid and assistance of family funds.
10. In our opinion, from these subsidiary principles, the broader principle that emerges is whether the remuneration received by the coparcener in substance though not in form was but one of the modes of return made to the family because of the investment of the family funds in the business or whether it was a compensation made for the services rendered by the individual coparcener. If it is the former, it is an income of the Hindu undivided family but, if it is the latter, then it is the income of the individual coparcener. If the income was essentially earned as a result of the funds invested, the fact that a coparcener has rendered some service would not change the character of the receipt. But if, on the other hand, it is essentially a remuneration for the services rendered by a coparcener, the circumstance that his services were availed of because of the reason that he was a member of the family which had invested funds in that business or that he had obtained the qualification shares from out of the family funds would not make the receipt, the income of the Hindu undivided family.'
11. We shall now examine the facts of the case in the light of the principles laid down by the aforementioned rulings. A perusal of the partnership deed dated September 1, 1958, would go to show that Rajendra Kumar and Gulab Chand Sohaney had no money at all. Rajendra Kumar had agreed to invest Rs. 20,000 at the commencement of the partnership business and also agreed that if further funds would be required, he would manage the necessary investment. The investment would carry 71/2% interest. The Hindu undivided family (assessee) provided the funds and the premises for starting the business. The funds provided to M/s. Rajendra Medical Stores by the Hindu undivided family (assessee) during different accounting years were as under :
Accountingyear ending DewaliAmount
Rs.201422,244201535,095 2016 39,182 2017 40,187201837,552201935,097
12. This goes to show that there had been heavy investments of moneyby the Hindu undivided family in the partnership firm continuously for sixyears. There is no manner of doubt in our mind that if the Hindu undivided family had not provided the business premises and the funds, thebusiness of M/s. Rajendra Medical Stores would not have even seen the lightof day. Rajendra Kumar in his statement has stated that he had takenmoney from the Hindu undivided family as loan as he had no property of his own when he thought to become a partner of Rajendra Medical Stores. The Hindu undivided family firm 'Singhai Khubchand Motilal ' is a proprietary concern of his father, Motilalji. No partition has taken place. He further admitted that he did not receive any interest on the capital which was taken on loan from the Hindu undivided family and it carried interest at the rate of 10 annas per 100 rupees per month. While Motilal, the karta of the Hindu undivided family and father of Rajendra Kumar, has in his statement clearly stated that he did not give money to Rajendra Kumar but to Rajendra Medical Stores, he has further made it clear by saying that money was handed over to both Rajendra Kumar and Shri Sohaney. Thus, the story that Rajendra Kumar had taken loan from the Hindu undivided, family is completely belied. Besides that, it has to be seen that for the preceding assessment years, 1960-61,1961-62, 1962-63 and 1963-64, the share income of Rajendra Kumar from the partnership firm has been held to be the income of the Hindu undivided family and the assessee accepted this position and the matter was not pursued further, which also lends support together with other circumstances that the Hindu undivided family was not merely an investor but the share income of Rajendra Kumar from the partnership firm belonged to the Hindu undivided family. The claim of money-lending business cannot be accepted on its face value. Thus, we have no manner of doubt that the department has properly discharged the burden that the income belongs to the Hindu undivided family and not to the individual coparcener. The finding of the Tribunal in the matter is correct. The income earned in the name of Rajendra Kumar has been to the detriment of the family funds or with the aid or assistance of those funds, which has been clearly proved in the present case.
13. There is another aspect of the case about which we shall also deal here. It has been contended on behalf of the assessee that the withdrawals by Rajendra Kumar from the partnership firm for the household expenses have not been utilised by the Hindu undivided family and thus the expenses have not been recorded in the books of account of the partnership firm. Therefore, the expenditure incurred by Rajendra Kumar, but for his withdrawals from the firm, would have been incurred by the family. But since we are of the opinion that the income of Rajendra Kumar from the firm belongs to the Hindu undivided family, it necessarily follows that the expenses have also been incurred out of the family funds and their withdrawals by Rajendra Kumar would not make any difference as he has not separated from the family and at best it can be said that these expenses were allowed to have been incurred by Rajendra Kumar on the alienation of family funds by the karta of the Hindu undivided family without legal necessity. No doubt, these alienations are not void but voidable at theoption of the other coparceners. These withdrawals by Rajendra Kumar do not in any way advance the case of the Hindu undivided family that the share income earned by Rajendra Kumar of the partnership firm could not be clubbed with the income of the Hindu undivided family.
14. In any case, the Income-tax Appellate Tribunal is a fact-finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it, the court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them and what were the findings reached on the evidence before it. If the conclusions reached by the Tribunal are not coloured by any irrelevant considerations or matters of prejudice, such conclusions being of fact, are not liable to be reversed by this court in the present jurisdiction. We have already held that the conclusions reached in the present case by the Tribunal in holding that the share income of Rajendra Kumar from the partnership firm is the income of the Hindu undivided family have been reached on proper consideration of the evidence on record. The finding of the said Tribunal has to be accepted and the order of the Tribunal needs no interference.
15. We are, therefore, of the opinion that the question which has been referred to us for answer by the Tribunal must be answered in the affirmative and the reference is accordingly disposed of with costs. Counsel's fee Rs. 100, if certified.