MEHAR SINGH C.J. - There is the Hindu undivided family of Kishori Lal with his three sons, Sunder Lal, Inder Sain and Parkash Chand. The Hindu undivided family was carrying on the business of timber under the name and style of Kishori Lal Sunder Lal. This was down to March 31, 1955. There was partial partition in the Hindu undivided family, in consequence of which the business of the Hindu undivided family firm, Kishori Lal Sunder Lal, was taken over by a partnership consisting of the father and the three sons, which was a partnership coming into existence from April 1, 1955. Subsequently, on June 9, 1955, Kishori Lal and his three sons executed a partnership deed, annexure 'F', in which they said that they had partitioned the Hindu undivided family business so as to carry it in their individual family rights and liabilities as a separate partnership concern, that the entire capital investment in the business known as Kishori Lal Sunder Lal was divided among the parties on April 1, 1955, and that the Hindu undivided family as such then ceased to have interest in that business on and from that date.
In the assessment years 1956-57 and 1957-58 the partnership firm, Kishori Lal Sunder Lal, it having continued the same name even after the members of the Hindu undivided family entered into the partnershiup, failed to persuade the income-tax authorities to register the firm under section 26A of the Income-tax Act, 1922 (Act 11 of 1922), and so the firm was treated by the income-tax authorities as owned by the Hindu undivided family, even in spite of the deed of partnership between the father and the three sons. The partnership firm failed to obtain relief up to the Income-tax Appellate Tribunal.
The present reference concerns the assessment year 1958-59. In regard to this particular assessment year the lower income-tax authorities adopted the same approach as in the previous two assessment years. They included the income from the timber business of Kishori Lal Sunder Lal in the income of the Hindu undivided family of Kishori Lal but at the same time made a protective assessment on the firm, Kishori Lal Sunder Lal, assessing the income from its business in the hands of the firm. They also disallowed the claim of the partnership firm for registration under section 26A. The reason upon which they proceeded was that, so far as the business assets of the Hindu undivided family as timber business were concerned, the net result was liability as on April 1, 1955, amounting to Rs. 29,916-2-6 and that although the partnership consisting of the father and the sons claimed to have taken over that family timber business, they did not take over that liability of Rs. 29,916-2-6, which, on the contrary, was left to be paid by the Hindu undivided family of Kishori Lal and his three son. On appeal the Income-tax Appellate Tribunal in its order of October 28, 1964, reversed that order and came to the conclusion that the timber business owned by the Hindu undivided family of Kishori Lal and his sons come to an end on 31st March, 1955, and that business was taken over by the partnership of Kishori Lal and his three sons under the name and style of Kishori Lal Sunder Lal on and from April 1, 1955. The Tribunal, therefore, allowed the claim of the partnership firm under section 26A of the Act and came to the conclusion that no part of the income accruing from the business of the firm, Kishori Lal Sunder Lal, could form part of the income of the Hindu undivided family of Kishori Lal after April 1, 1955. It directed that the income of the partnership firm will be excluded from the income of Kishori Lals Hindu undivided family and will be taken as income belonging to the partnership firm which, it said was to be granted registration under section 26A. The Tribunal proceeded to its conclusion upon this material :
(a) that on taking over the timber business on April 1, 1955, a personal account of each on of the partners was opened in the business books of the partnership firm,
(b) that whatever profit accured during the first accounting year, that was credited to all the partners, according to their shares, separately in their accounts, and
(c) that the subsequent conduct of the partners of the partnership firm was, (i) opening bank account in the name of the partnership firm, informing the bank obviously about the change, (ii) having the firm registered with the Registrar of Firms, (iii) having recognition of the partnership firm by the sales tax department, (iv) institution of suits by it, for recovery of its business debts by the partnership firm in its own name, and (v) payment of profession tax under a statute relating to such tax.
The Tribunal was of the opinion that the members of the Hindu undivided family could very well leave the liabilities of the business of that family in the amount as stated already to be paid by the Hindu undivided family while taking over the timber business without such liabilities by the partnership firm. So, considering the above material, it found as a fact that on and from April 1, 1955, the Hindu undivided family timber business was taken over by firm Kishori Lal Sunder Lal, a registered partnership, and on that finding it decided as explained above.
On an application by the Commissioner of Income-tax, Punjab, Jammu and Kashmir and Himachal Pradesh, under sub-section (1) of section 66 of the Act, the Tribunal has made reference of these question to this court :
'(1) Whether, on the facts and in the circumstances of the case, notwithstanding the non-division of the liabilities of the business, Messrs. Kishori Lal Sunder Lal, between the partitioning members of the Hindu undivided family, there was a valid partial partition of the said business and
(2) Whether, on the facts and in the circumstances of the case, the business Messrs. Kishori Lal Sunder Lal, constituted a firm, entitled to be registered under section 26A of the Income-tax Act, 1922 ?'
The learned counsel for the Commissioner of Income-tax has contended that while the Hindu law admits of partial partition, but the legal basis for such partial partition must be complied with before it can be found to have been done. He has urged that not until the members of the Hindu undivided family divided both the assets as also the liabilities of the Hindu undivided familys timber business, could they be said to have succeeded in partial partition of the property of the family so far as the timber business of the family was concerned. In this case he has stressed that in fact there was division of nothing because the Tribunal has found that the net result of the consideration of the business assets of the timber business of the Hindu undivided family was liability, and the learned counsel urges that there were thus no assets to be divided. What was available of division was only the liability, which in fact was not divided. So nothing was divided and the deed of partition was merely a shadow transaction arrived at to escape liability for income-tax. He refers to G. Venkataswami Naidu & Co. v. Commissioner of Income-tax to contend that after the Tribunal found primary evidentiary facts, then, in the present case, it had to apply legal principles in regard to partial partition to reach the conclusion whether the timber business continued to be the business of the Hindu un divided family of Kishori Lal or it became the business of the partnership firm. The subject of partial partition is dealt with in paragraph 328, at page 381, of Mullas Hindu Law, 1966 edition, and for the present purpose the manner and method of such partial partition is the same was that of partition, which subject is dealt with in paragraph 322 and 325 of the same book. It is stated in paragraph 322 that :
'According to the true notion of an undivided Mitakshara family, no individual member of that family, whilst it remains undivided, can predicate of the joint property, that he - that particular member - has a certain definite share, one-third or one-fourth. Partition according to that law, consists in a numerical division of the property : in other words, it consists in defining the shares of the coparceners in the joint property; and actual division of the property by metes and bounds is not necessary.'
And in paragraph 325 it is said :
'Partition is a severance of joint status, and as such it is a matter of individual volition. All that is necessary, therefore, to constitute a partition is a definite and unequivocal indication of his intention by a member of a joint family to separate himself from the family and enjoy his share in severalty.'
So partition in Hindu law is effected by a definite and unequivocal indication of a coparceners intention to separate, and obviously partial partition by the same coparcener is effected by his definite and unequivocal indication of his intention to partition a particular business or property of the joint family, leaving the rest as joint family property. The learned counsel for the Commissioner of Income-tax says that, on the primary evidentiary facts found by the Tribunal, when the above legal principles in regard to partial partition in Hindu Law are applied, what has been decided by the Tribunal is then a mixed question of fact and law. This argument ignores the clear statement in the paragraphs already referred to that it is the intention of a coparcener which determines whether he has had partial partition or not. Intention is always a question of fact. So that when those principles of Hindu law in relation to partial partition are applied to the primary evidentiary facts found by the Tribunal the conclusion reached in regard to the intention of the coparceners of Kishori Lals Hindu undivided family still remains a conclusion of fact, being conclusion on their intention in this respect. In Sir Sundar Singh Majithia v. Commissioner of Income-tax, their Lordships of the Privy Council, in regard to a somewhat similar partnership deed, held that :
'To decide that an instrument is in this sense not genuine is to come to a finding of fact : whether there was evidence upon which it was open to the income-tax authority to come to such a decision is a question of law.'
So the Tribunal came to a finding of fact that the partnership between the members of the Hindu undivided family of Kishori Lal consisting of himself and his three sons was a genuine contract of partnership followed by a deed of partnership and conduct of the partners, which supported the existence of the contract of partnership. The finding was based on evidence and material which has already been listed above, and this is not a case in which an argument is open to the side the Commissioner of Income-tax that that finding is not based on any evidence.
In Commissioner of Income-tax v. Juggilal Kamalapat, their Lordships of the Supreme Court held that the question whether, in fact, on the evidence, a firm had been constituted and came into existence, 'is a pure question of fact on which the decision of the Tribunal is final and no reference to the High Court would lie under section 66' of the Act.
It appears that it is to avoid what is now a settled position that on a question as to the constitution of the partnership firm of Kishori Lal and his three sons the finding of the Tribunal is not open to consideration in the High Court, that the shape has been given to the first question as it is. But the shape or form of the question is not material. The question itself proceed on the basis that in a case of the type as the present where there is no division of liabilities, there is no case of valid partial partition of the Hindu undivided family business, but the omission to divide the liabilities is only factor for consideration. It is not the sole deciding factor. The Tribunal has considered at least seven other factors on which it has based its finding of fact. It has also considered that eighth factor, but has come to the conclusion that non-division of liabilities did not affect the question of effective partial partition of the joint family business by Kishori Lal and his three sons. Merely because the Tribunal has, after due consideration, not found in favour of the Commissioner of Income-tax on this one consideration, when its finding of fact is based on a number of other relevant pieces of evidence and considerations, a question of law does not arise in relation to its such finding of fact. The question assumes that non-division of liabilities in the facts and circumstances of this case, was a conclusive piece of evidence against the constitution of this case, was a conclusive piece of evidence against the constitution of the firm. This certainly is not the case, and the Tribunal was justified in taking into consideration that factor and circumstance as also the other factors and circumstances and then read its finding. When, after considering all these factors and circumstances, it has reached the conclusion that the partnership firm in this case was validly constituted, it is a finding of fact in regard to which no reference is competent under section 66 of the Act. The first question as posed does not, therefore, raise any question of law. It, in fact, seeks to reopen a finding of fact, which is not permissible in the shape of a reference to this court. The answer to the first question is, therefore, in the affirmative that notwithstanding the non-division of the liabilities of the timber business of the Hindu undivided family of Kishori Lal, there was a valid partial partition among the members of that family passing on its Hindu undivided family business to the partnership of the members of that family.
The answer to the second question follows from the answer to the first question that the partnership firm, Kishori Lal Sunder Lal, was a validly constituted partnership firm and was entitled to be registered under section 26A of the Act by the Income-tax authorities.
The Income-tax Commissioner will bear the costs of the respondent, the counsels fee being Rs. 100.
R.S. NARULA J. - I agree.