MEHAR SINGH, J. - This judgment will dispose of two applications under section 66 (2) of the Income-tax Act, 1922, being Income-tax Cases Nos. 11-D and 12-D of 1954.
There were three members, Beni Parshad and his two sons ChuniLal and Mahabir Parshad of the Hindi undivided family (to be referred to as 'the family' hereafter) which carried on business of various kinds in the name of firm Behari Lal-Beni Parshad which will be referred to as 'the family firm'. Beni Parshad died at the age of 58 years, on December 10, 1948. Of his sons Chuni Lal because major in 1942 and Mahabir Parshad in 1950. Something, in 1944 Chuni Lal started business of his own in the name and style of Chuni Lal Jaipuria, which will hereafter be referred to as 'the Jaipuria firm'. On February 2, 1946, Chuni Lal, representing his own individual firm, 'the Jaipuria firm', entered into partnership with Baij Nath Bajoria and it is said that if fact the deed of partnership was executed between them on February 7, 1946. That was a partnership for purchase and acquisition of armour plates from the Field Liquidation Commission. In the Jaipuria firm the share of Chuni Lal was eleven annas and of Baij Nath Bajoria five annas in a rupee. Baij Nath Bajoria subscribed Rs. 1,50,000 towards the capital of the partnership but Chuni Lal did not subscribed any capital himself and the rest of the capital of the partnership was to come from the family firm. It appears that the Jaipuria firm made profits on its armour plates business and in that connection, in the assessment year 1947-48, the family firm was assessed to Income-tax Officer, B. 1 Ward of Delhi, on March 18, 1949. The Income-tax Officer found that the eleven annas share in the Jaipuria firm was not the personal and individual share of Chuni Lal by was the share of the family firm. The reasons given by the Income-tax Officer for coming to this conclusion are (a) that no capital was invested by Chuni Lal himself fin the Jaipuria firm, (b) (i) that on February 12, 1946, the family firm paid Rs. 40,000 to one Mr. E. V. Crushandal to remove him from competition for the contract for armour plates business, (ii) that on February 4, 1946, Rs. 99,132 were paid as custom duty by the family firm for the Jaipuria firm and (iii) that the total amount of payments made by the family firm to the American Field Commissioner came to about Rs. 3,30,440 as cost of the armour plates purchased in the name of Jaipuria firm, and that all these transactions were entered in full detail in the account books of the family firm, (c) that on dissolution of the Jaipuria firm partnership the five annas share coming to about Rs. 90,000 of Baij Nath Bajoria was paid to the latter by the family firm and not by Chuni Lal, (d) that Chuni Lal was having his separate account with the Bank of Jaipur Limited but he made no use of that in financing and investing moneys in the Jaipuria firm, (e) that Chuni Lal being a young man of about 22 years of age and not subscribing any capital himself was given a share of eleven annas in a rupee in the Jaipuria firm partnership simply because the family firm was financing the Jaipuria firm, otherwise the other partner could not possibly have conceded such a share to a man in the position of Chuni Lal, and (f) that it was not true that the family firm advanced a loan to the Jaipuria firm because (i) no collateral security was obtained, (ii) the advance was not a limp sum but of sums as and when required for the business of Jaipuria firm, and (iii) that no payment was directly made by the family firm to the Jaipuria firm but only adjustment entries were made in the account books. On consideration of all these reasons the Income-tax Officer came to the conclusion that the eleven annas share in the Jaipuria firm was the share of the family firm and no of Chuni Lal individually. The profits of the Jaipuria firm of the share of the family firm were taxed in the income of the latter. The family firm did not appeal against that assessment, which obviously means that it accepted the assessment and paid tax accruing to it. It was Chuni Lal alone, in his personal capacity, who filed an appeal to the Appellate Assistant Commissioner of Income-tax and in the grounds of appeal his main attack, so far as the present applications are concerned, was that the Income-tax Officer had erred in his finding that the eleven anas share in the partnership of Jaipuria firm was not his individual share but was that of the family and that the Income-tax Officer also erred in disallowing a sum of Rs. 40,000 paid to Mr. E. V. Crushandal as revenue expenditure because he treated it as capital expenditure. This amount had been claimed at the time of the assessment a revenue expenditure and this position was not accepted by the Income-tax Officer.
The Appellate Assistant Commissioner by his order of July 22, 1950, agreed with the Income-tax Officer on both the questions raised by Chuni Lal in his appeal. He found that the payment of Rs. 40,000 to Mr. E. V. Crushandal was a capital expenditure and not a revenue expenditure because it was paid to him to oust him as a competitor in obtaining the armour plate business. In regard to the question as who was the partner of the Jaipuria firm he confirmed the finding of the Income-tax Officer as well and stated his grounds in support of that finding as (a) that Chuni Lal had been given substantial share of eleven annas in a rupee in the partnership because he was able to contribute a heavy amount from the funds of the family firm, (b) that no limp sum amount was advanced by the family firm to the Jaipuria firm, (c) that no covering guarantee was taken for the amounts advanced, (d) that complete and full narrations of the transactions appear in the account books of the family firm, (e) that the family firm, paid the amounts of Rs. 99,132 (custom duty dues), Rs. 40,000 (paid to Baij Nath Bajoria on dissolution) direct and the account books refer to the same payments and (f) that Chuni Lal had no qualifications for the other partner Baij Nath Bajoria to let him have the large share of eleven annas in a rupee except on consideration that the family was the real partner through him.
Chuni Lal went in appeal, from the order of the Appellate Assistant Commissioner, to the Income-tax Tribunal, and in the grounds of appeal be raised the same two questions as he had done before the Appellate Assistant Commissioner.
The Jaipuria firm was dissolved something in October, 1946, and the family partitioned its business assets on November 13, 1947. This partition took place between Beni Parshad the father, and his two sons named Chuni Lal and Mahabir Parshad. It was the case of the family that while the other business assets of the family firm were partitioned between the three, the unsold stock of armour plates of the value of Rs. 89,500 was not brought into that partition because it was not the property of the family and the family firm. In the assessment year 1948-49, the family was taxed on the profits received from the Jaipuria firm and in connection with the armour plates business. The Income-tax Officer, in his order of March 18, 1949, confirmed his previous order on the previous assessment that eleven annas share in the Jaipuria firm and in connection with the armour plates business. The Income-tax Officer, in his order of March 18, 1949, confirmed his previous order on the previous assessment that eleven annas share in the Jaipuria firm belonged to the family and not to Chuni Lal individually. Both Chuni Lal and the family appealed against the order of the Income-tax Officer to the Appellate Assistant Commissioner of Income-tax who confirmed the order of the Income-tax Officer. In the grounds of appeal before the sections all that was stated was that the Income-tax Officer had heard in coming to the conclusion that the share in the Jaipuria firm belonged to the family and not to Chuni Lal individually. There were appeals to the Income-tax Appellate Tribunal, in which the same ground was repeated. It was urged before the Income-tax Appellate Tribunal that the dealings of the Jaipuria firm with family have been treated as dealings of Chuni Lal individually with the family and that after the division of November 13, 1947, Chuni Lal became partner of his father Beni Parshad. The Tribunal was of the opinion that no findings had been entered on these questions and it remitted the case to the Income-tax Officer for finding on these matters. The Income-tax Officer, on April 10, 1953, made a detailed report in which he came to the conclusions (a) that substantially Chuni Lal was the most active and working member of the family and the family firm because his younger brother was a minor and his father was a fairly old man and thus Chuni Lal was the guiding factor in all matters pertaining to the family and (b) that the petition of the family business of November 13, 1947, was not a genuine affair because (i) what was shown as partition was partition of the business of the family firm and nothing else, (ii) the business capital of the family firm was divided between the father and the two sons and no share was given to the wife of Beni Parshad, (iii) entries were made in the books of account but were not signed by any member of the family and no member of the family executed a release deed in favour of the other members, and (iv) the family continued to exist and so it could not be said that the armour plates business was left out of partition because it was the individual business of Chuni Lal alone.
When the report of the Income-tax Officer came before the Tribunal the three appeals, one relating to the assessment year 1947-48, and the two relating to the assessment year 1948-49 are consolidated by it with the consent of the parties and disposed of by one judgment of August 7, 1953. The Tribunal came to the conclusion that in so far as the assessment of the year 1947-48 was concerned, the family or the family firm not having appealed against the order of assessment, the Appellate Assistant Commissioner was wrong in entertaining appeal by Chuni Lal, that the amount of Rs. 40,000 paid to Mr. E. V. Crushandal was rightly found to be capital expenditure and not revenue expenditure and that the share in Jaipuria firm was the share of the family firm and not of Chuni Lal individually. There were certain other matter considered, which are not relevant here, and those also were found against the appellants. The appeals were dismissed.
Thereupon an application was made by Chuni Lal to the Tribunal for drawing up a statement of the case and for reference of the following questions to the High Court :
'1. Whether in the circumstance of the case the sum of Rs. 40,000 paid to Mr. E. V. Crushandal by the assessee is an expense in the nature of capital expense
2. Whether the assessee firm was legally debarred from raising in appeal before the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal objection regarding the apportionment of the share of profits of the firm in the hands of Chuni Lal, partner-representative of the family of Behari Lal Beni Parshad when his contention before the Income-tax Officer was that he was a partner in the assessee five in his representative capacity
3. Whether the Income-tax Officer can determine the status other than what is shown in the partnership deed of a partner in the file of a firm while making the assessment of it
4. If the answer to question No. 3 be in the affirmative, whether the status of Chuni Lal partner determined by the Income-tax Officers representative of the Hindu undivided family of Behari Lal Beni Parshad is correct in law ?'
A second application was made by the family firm to the Tribunal for drawing up a case in regard to the assessment year 1948-49 and referring the following two questions to the High Court :
'1. Whether the order, dated August 7, 1953, of the Tribunal dismissing the appeal of the Hindu undivided family Behari Lal Beni Parshad is not vitiated by reason of the remand report dated April 10, 1953, having not been fully considered, particularly as far as it related to the effect of non-inclusion in the division of the point family business assets of the investments in the armour plates business
2. Whether the conclusion that the share of Chuni Lal Jaipuria in the armour plates business was owned by the assessee Hindi undivided family is based on any material and the profits arising therefore have rightly been charged to tax in its hands ?'
The Tribunal by one order of January 15, 1954, dismissed both the applications saying that its findings were pure findings of fact.
Thereupon the family firm has made the application that is Income-tax Case No. 11-D and Chuni Lal has made the application that is Income-tax Case No. 12-D of 1954; each applicant has asked this court to demand a reference from the Tribunal on the questions on which the Tribunal was asked to make reference to this court in the application of each applicant.
Only two questions have really been canvassed in this court and they are (a) that the sum of Rs. 40,000 paid to Mr. E. V. Crushandal is not capital expenditure but is revenue expenditure but is revenue expenditure and (b) that the eleven annas share in the Jaipuria firm was the individual share of Chuni Lal and not of the family or the family firm. The facts with regard to the payment of Rs. 40,000 are admitted. Mr. E. V. Crushandal was paid that sum in the very beginning to oust him from competition altogether. Once he was out, the Jaipuria firm was able to secure the contract for the purchase of armour plates from the American Field Commission without any difficulty and without any competition. The only argument advanced in this behalf by the learned counsel appearing for the applicant is that this amount was spent by the Jaipuria firm in acquisition of stock-in-trade and therefore it must be treated as revenue expenditure. The fact is that this amount was paid to Mr. E. V. Crushandal who could not supply and stock-in-trade. It was paid to him so that he may withdraw from competition with the Jaipuria firm, leaving the latter alone to enter into business with the American Field Commission. In other words it was an expenditure nor in connection with the business of the armour plates, but it was an expenditure in the nature of a capital expenditure to prepare ground for securing all the business of the armour plates. It was not expenditure for the purchase of stock-in-trade from any consideration. No stock-in-trade was purchased with the amount. This amount was never paid to the American Field Commission and everything that was purchased from that Commission was paid for separately and independently. It is true that on proved facts the conclusion whether a particular expenditure is in the nature of revenue or capital expenditure is a question of law, but the present is a case so clear that there is no error committed by the Tribunal in reaching the conclusion in relation to this particular amount.
In so far as the other question is concerned as to who is in fact the eleven annas share partner in the Jaipuria firm, whether Chuni Lal in his personal capacity or as representing the family, it is apparently and obviously a question of fact. It is now well established that interference on a finding of fact can only be (a) if there is no evidence in support of such a finding or (b) if the conclusion arrived at is a conclusion which on the material no judicial tribunal would arrive at. Neither is the case here. The learned counsel for the applicant has contended that the Tribunal has failed to discuss and consider the report of the Income-tax Officer after the remand of the case. The Tribunal has referred to the report in its order and since it was agreeing with the reasoning of the Income-tax Officer, merely because it has not re-written those reasons in its own order that is not a group for concluding that it has not considered those reasons and has not based its order upon reasons. The learned counsel has then contended that the family or the family firm was not in fact a partner in the Jaipuria firm but had merely lent the amounts if and where required. At the hearing what the learned counsel attempted to show was that the family firm lent the amount to the Jaipuria firm, but then it was pointed out to him that this was a new case set up in these applications and earlier it was nobodys case because before the authorities below the position was that the loans were given to Chuni Lal who then passed on the amounts as his own amounts to the Jaipuria firm as a partner. It is apparent that the applicant is not sure in what capacity the family firm gave the loans for the purchases made for the Jaipuria firm. It appears that there has been shifting of ground by the family firm so as to justify that it was not investing money in the Jaipuria firm as a partner but only lending money. This position is not consistently taken and is in fact not true. The learned counsel for the applicant has further pointed out that in fact the family firm was paid interest on the amounts advanced by it to the Jaipuria firm and on the amount of interest it has paid income-tax. From this it was inferred that what was given by the family firm was a loan and not capital investment. But reference to the assessment order, dated March 18, 1949, of the Income-tax Officer shows that interest was paid not only to the family firm but also to the other partner Baij Nath Bajoria. The explanation by the learned counsel for the respondent appears to be sound that the Jaipuria firm partnership appears to have as its capital the loans advanced by both the partners, on which loans, each partner charged interest to the firm first and what was left a profits was dividend according to the shares of the partners. The contention on behalf of the applicant has really no substance in it. The last contention of the learned counsel for the applicant has been that the Appellate Tribunal has not considered all the material in arriving at the conclusion that the partner of the Jaipuria firm was the family firm and not Chuni Lal himself. In this connection the evidence that, according to the learned counsel, has been omitted from consideration is that showing that the family firm advanced loans to the Jaipuria firm, after dissolution of the Jaipuria firm and portion of the family firm, the stock received from the Jaipuria firm was not partitioned by the partners of the family firm, and that the profits of Chuni Lal of the eleven annas share in the partnership of Jaipuria firm were never blended with the income of the family. The last consideration does not really arise in this case. The other considerations referred to have been considered by the Income-tax authorities at one stage or the other. It is not true that those matters have not been considered by the Income-tax authorities. There was material before the Income-tax authorities upon which they could reach the conclusion of fact that the eleven annas share partner of the Jaipuria firm was not Chuni Lal personally but the family firm and that being a finding of fact based on evidence this court has no jurisdiction to interfere with such a finding and direct a reference to be made to it with regard to the same.
The result is that these applications are entirely misconceived and are dismissed with costs. In each application the counsel for the respondent is allowed a fee of Rs. 150.
BHANDARI, C.J. - I agree.