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Commissioner of Income-tax Vs. Chanchaldas Sobhrajmal - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtRajasthan High Court
Decided On
Case NumberD.B. Income-tax Reference Case Nos. 168 and 175 of 1981 and 5, 10, 11 and 67 of 1982
Judge
Reported in[1987]164ITR306(Raj)
ActsIncome Tax Act, 1961 - Sections 256(1) and 256(2); Partnership Act - Sections 30
AppellantCommissioner of Income-tax
RespondentChanchaldas Sobhrajmal
Appellant Advocate R.N. Surolia, Adv.
Respondent Advocate N.K. Maloo, Adv.
Excerpt:
- - the tribunal also referred to the fact that in the assessment years 1971-72 and 1972-73, the credit balances in the accounts of the partners, both major as well as minor in the partnership firm, represented their separate and self-acquired capital. the tribunal also found as a fact that in the subsequent years, the credit balances in the accounts of the major as well as minor coparceners constituted their separate and self-acquired capital. the decision of the tribunal that the share of profit of the major as well as the minor coparceners could not be included in the assessment of the assessee-hindu undivided family was thus based on a consideration of the facts of the case and emerged out of the finding of fact recorded by the tribunal......to this court for its opinion.2. the assessee is m/s. chanchaldas sobhrajmal, beawar, which is a hindu undivided family and the assessments pertain to the assessment years 1968-69 to 1972-73 and 1974-75. a partnership firm, m/s. murlidhar and company, was constituted by a deed of partnership dated september 9, 1966, in which the hindu undivided family, m/s. chanchaldas sobhrajmal,entered as a partner through its karta, shri mirchumal. three other partners of m/s. murlidhar and company, namely, laxmandas, udhavdas and kanhaiyalal, were also coparceners of the assessee family. two other coparceners of the assessee family, baldeodas and devidas, minor sons of chanchaldas, were admitted to benefits of the partnership, while another minor partner of the firm vasumal was an outsider. in the.....
Judgment:

Dwarka Prasad, J.

1. These six applications have been moved by the Commissioner of Income-tax, Jaipur, under Section 256(2) of the Income-tax Act, 1961 (hereinafter referred, to as 'the Act'), seeking a direction to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter referred to as 'the Tribunal'), to state the case and refer questions arising out of the order of the Tribunal to this court for its opinion.

2. The assessee is M/s. Chanchaldas Sobhrajmal, Beawar, which is a Hindu undivided family and the assessments pertain to the assessment years 1968-69 to 1972-73 and 1974-75. A partnership firm, M/s. Murlidhar and Company, was constituted by a deed of partnership dated September 9, 1966, in which the Hindu undivided family, M/s. Chanchaldas Sobhrajmal,entered as a partner through its karta, Shri Mirchumal. Three other partners of M/s. Murlidhar and Company, namely, Laxmandas, Udhavdas and Kanhaiyalal, were also coparceners of the assessee family. Two other coparceners of the assessee family, Baldeodas and Devidas, minor sons of Chanchaldas, were admitted to benefits of the partnership, while another minor partner of the firm Vasumal was an outsider. In the subsequent years, Laxmandas and Kanhaiyalal were replaced in the partnership firm by their wives, Smt. Kishani Bai and Meena Bai, as partners. In the assessments pertaining to the assessment years 1968-69 and 1969-70, the Income-tax Officer held that the major and minor coparceners of the assessee family were taken as co-partners in the partnership firm, M/s. Murlidhar and Company, in view of the capital invested by the Hindu undived family in the partnership firm and, therefore, they represented the Hindu undivided family in the firm along with the karta, Mirchumal. The Income-tax Officer, consequently, held that the income of the minor coparceners was also liable to be included in the assessment of the Hindu undivided family, assessee. However, in respect of the major coparceners, the Income-tax Officer did not include their shares in the assessment of the Hindu undivided family, but while making the assessments of the Hindu undivided family for the assessment years 1970-71, 1971-72 and 1972-73 did not include the income of the minor coparceners. In respect of the assessment year 1974-75, the Income-tax Officer followed the order passed by him in the earlier assessment years 1970-71 to 1972-73.

3. In the appeals filed before the Appellate Assistant Commissioner, it was held that the partnership deed shows that only the karta, Mirchumal, joined the firm as representing the Hindu undivided family and that the major coparceners had joined the partnership firm in their individual capacity as working partners, while the minor coparceners were merely admitted to the benefits of the partnership. It was also noticed by the Appellate Assistant Commissioner while deciding the appeals that the partnership deed showed that there was no stipulation that the minors would contribute any capital. On the basis of these facts, the Appellate Assistant Commissioner came to the conclusion that the share income of the minors could not be included in the total income of the Hindu undivided family in all the aforesaid assessment years.

4. The Revenue filed appeals before the Tribunal in respect of all the assessment years. Five appeals relating to the assessment years 1968-69 to 1972-73 were decided by the Tribunal by a common order dated September 29, 1979. The Tribunal held that there was no material on record on the basis of which it could be said that there was any connection whatsoever between the investment of the assessee-Hindu undividedfamily in the partnership firm with the major coparceners joining as full partners or to the admission of the minor coparceners to the benefitsof the partnership. The Tribunal negatived the argument advanced before it on behalf of the Revenue that the investment made by the Hindu undivided family in the partnership firm was consideration for admitting the minor coparceners to the benefits of the partnership. The Tribunal, therefore, affirmed the conclusion arrived at by the Appellate Assistant Commissioner that there was no connection whatsoever between the investment of the assessee family in the firm and these persons joining the firm as full partners or admission to the benefits of the partnership of the minors. The Tribunal also referred to the fact that in the assessment years 1971-72 and 1972-73, the credit balances in the accounts of the partners, both major as well as minor in the partnership firm, represented their separate and self-acquired capital. Consequently, the Tribunal came to the conclusion that the three major and two minor coparceners became partners of the firm or were admitted to the benefits of the partnership, as the case may be, in their own right and in their individual capacity but not representing the assessee-Hindu undivided family and so their share of profits could not be included in the assessment of the assessee family. In the appeal arising out of the assessment relating to the subsequent assessment year 1974-75, the Tribunal followed its earlier decision referred to above and dismissed the appeal filed by the Revenue, vide its order dated August 22, 1980.

5. In respect of the six assessment years mentioned above, the Commissioner of Income-tax, Jaipur, filed reference applications under Section 256(1) of the Act before the Tribunal. Five applications pertaining to the assessment years 1968-69 to 1972-73 were disposed of by the Tribunal by its order dated March 31, 1980, while the reference application relating to the year 1974-75 was decided by the order of the Tribunal dated March 31, 1981. The Tribunal rejected all the applications for making a reference on the ground that the Tribunal while rejecting the appeals filed by the Revenue recorded a finding of fact after the consideration of the material on record that the major coparceners of the Hindu undivided family were made partners and the minor coparceners were admitted to the benefits of the partnership and their share of profit could not be included in the assessment of the assessee-Hindu undivided family. It was observed that it was found as a fact by the Tribunal that the assessee-Hindu undivided family was represented only by the karta, Mirchumal. The Tribunal was of the view that the findings arrived at by the Tribunal while deciding the appeals preferred by the Revenue were based on facts, the correctness of which has not been questioned by the Revenue and as such no question of law arose out of the orders of the Tribunal.

6. In these applications seeking reference, it was urged by learned counsel for the Revenue before us that the minor coparceners did not contribute any capital nor did they contribute any skill or labour and that it should be assumed that they were admitted to the benefits of the partnership on the consideration that the Hindu undivided family had invested capital in the partnership firm. The deed of partnership dated September 9, 1966, was read before us. We are unable to find anything in the document of partnership which could lead us to make an assumption as suggested by learned counsel for the Revenue. The Tribunal has found as a fact that the assessee-Hindu undivided family has entered into the partnership as represented by the karta and the major coparceners joined the partnership firm as partners in their individual capacity and were referred to as working partners in the partnership deed. The minor coparceners were admitted to the benefits of the partnership in accordance with the provisions of Section 30 of the Partnership Act with the consent of all the partners and there was nothing to suggest that the minor coparceners were admitted to the benefits of the partnership on account of the fact that the assessee-Hindu undivided family had invested capital in the partnership firm. The Tribunal also found as a fact that in the subsequent years, the credit balances in the accounts of the major as well as minor coparceners constituted their separate and self-acquired capital. The decision of the Tribunal that the share of profit of the major as well as the minor coparceners could not be included in the assessment of the assessee-Hindu undivided family was thus based on a consideration of the facts of the case and emerged out of the finding of fact recorded by the Tribunal. In this view of the matter, the Tribunal appears to be right in holding that no question of law arose out of the orders passed by the Tribunal dismissing the appeals filed by the Revenue before it.

7. All these applications under Section 256(2) of the Income-tax Act, 1961, seeking reference are, therefore, dismissed as no question of law arises out of the orders passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur.


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