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Commissioner of Income-tax Vs. Brij Bhushan Lal Suresh Kumar - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Case No. 138 of 1977
Judge
Reported in[1986]159ITR825(P& H)
ActsIncome Tax Act, 1961 - Sections 186(1), 256(1) and 256(2)
AppellantCommissioner of Income-tax
RespondentBrij Bhushan Lal Suresh Kumar
Appellant Advocate Ashok Bhan and; Ajay Mittal, Advs.
Respondent Advocate D.K. Gupta and; Hemant Kumar Gupta, Advs.
Excerpt:
.....from the date when the parties concerned acquire knowledge of passing of the said order. - an application filed by the revenue under section 256(1) of the act was also dismissed which led to the filing of the present petition for a mandamus for referring the following three questions to this court :(i) whether, on the facts and in the circumstances of the case, there was a valid and/or genuine partnership between brij bhushan lal as representing the hindu undivided family and his son, shri suresh kumar, in his individual capacity ? (ii) whether, on the facts and in the circumstances of the case, the income-tax officer was right in law in cancelling the registration of the firm for the assessment year 1965-66 and whether such an order is viti-ated by his failure to cancel the..........he entered into an agreement of sub-partnership with his son, suresh kumar, a coparcener in the hindu undivided family, to share profits derived from the firm, messrs, brij bhushan lal romesh kumar. prior thereto, the income from the said firm was being assessed in the hands of brij bhushan lal as income of the joint family. by the said agreement, the profits were to be divided in the ratio of 10/16ths and 6/16ths between brij bhushan lal and suresh kumar, respectively. the benefit of registration was granted to the sub-partnership for the year 1964-65 and registration was allowed to continue for the assessment year 1965-66. later on, while dealing with a partial partition plea during the assessment proceedings of the hindu undivided family relating to the year 1971-72, the income-tax.....
Judgment:

S.P. Goyal, J.

1. Brij Bhushan Lal, as karta of his Hindu undivided family, was a partner in a number of firms. On November 1, 1963, he entered into an agreement of sub-partnership with his son, Suresh Kumar, a coparcener in the Hindu undivided family, to share profits derived from the firm, Messrs, Brij Bhushan Lal Romesh Kumar. Prior thereto, the income from the said firm was being assessed in the hands of Brij Bhushan Lal as income of the joint family. By the said agreement, the profits were to be divided in the ratio of 10/16ths and 6/16ths between Brij Bhushan Lal and Suresh Kumar, respectively. The benefit of registration was granted to the sub-partnership for the year 1964-65 and registration was allowed to continue for the assessment year 1965-66. Later on, while dealing with a partial partition plea during the assessment proceedings of the Hindu undivided family relating to the year 1971-72, the Income-tax Officer, being of the view that no partial partition had ever taken place, issued a notice under Section 186(1) of the Income-tax Act, 1961 (hereinafter called 'the Act'), to show cause as to why continuance of registration of the sub-partnership for the assessment year 1965-66 be not cancelled and after considering the reply submitted by the assessee, cancelled the registration. The order having been affirmed by the Appellate Assistant Commissioner, the assessee went in second appeal before the Tribunal who reversed the same and restored the registration of the sub-partnership. An application filed by the Revenue under Section 256(1) of the Act was also dismissed which led to the filing of the present petition for a mandamus for referring the following three questions to this court :

'(i) Whether, on the facts and in the circumstances of the case, there was a valid and/or genuine partnership between Brij Bhushan Lal as representing the Hindu undivided family and his son, Shri Suresh Kumar, in his individual capacity

(ii) Whether, on the facts and in the circumstances of the case, the Income-tax Officer was right in law in cancelling the registration of the firm for the assessment year 1965-66 and whether such an order is viti-ated by his failure to cancel the registration of the firm for the assessmentyear 1964-65

(iii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there is no legal bar on thekarta of the family to enter into partnership with a coparcener of his own family ?'

2. The Tribunal held that the proposition, subject-matter of question No. 3, stood concluded by a decision of the Supreme Court in CIT v. Sir Hukumchand Mannalal and Co. : [1970]78ITR18(SC) and declined the reference of questions Nos. 1 and 2, observing that the same were only consequential to question No. 3. A perusal of the said Supreme Court judgment reveals that it has absolutely no bearing on the facts and the question of law involved in the present case. In that case, it was ruled that there was no bar for one of the members of the Hindu undivided family to enter into a partnership with strangers representing the interest of the family. The Supreme Court never held that a coparcener can become a partner with the karta of the Hindu undivided family. This question specifically came up before the Supreme Court in Firm Bhagat Ram Mohan Lal v. CEPT : [1956]29ITR521(SC) and it was held that a coparcener cannot be a partner with the karta of a Hindu undivided family with the aid of the assets of the family which obviously means that he can enter into a partnership if he has individual assets apart from his share in the Hindu undivided family assets. At this stage, it is not necessary for us to enter into an elaborate discussion on this question but the fact remains that questions Nos. 1 and 3 are questions of law which do arise from the order of the Tribunal. As it gave no finding that before cancelling the registration for the year 1965-66, it was necessary to cancel the registration for the year 1964-65, question No. 2 does not arise from its judgment.

3. In the result, a mandamus is issued requiring the Tribunal to refer questions Nos. 1 and 3 together with the statement of the case to this court for its opinion.


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