1. The Income-tax Appellate Tribunal, Calcutta Bench, has at the instance of the Commissioner of Income-tax, Madras, made this reference. It concerns the assessment of four money-lending businesses. The Commissioner of Income-tax says that these businesses are really businesses of a joint Hindu family and the profits should be assessed on that basis. The tribunal has held that they are separate businesses and the profits should be assessed separately. The first and most important business is carried on in the name of Sha Agarchand Manmal and the three other businesses under the styles of M. Ratanchand, M. Parasmal and Bai Naini Kuar respectively. The question which has been referred reads as follows:
Whether in the circumstances of the case the income of the business in the names of Ratanchand, Parasmal and Naini Kuer, sons and wife of the respondent is assessable as the income of a Hindu undivided family in the hands of the respondent
2. In order to understand the position, it is necessary to go back to the year 1891. On 12th February of that year Sha Agarchand, an Oswal Jain, the founder of the business now carried on under the style of Sha Agarchand Manmull died, leaving a widow Champ Kuar but no issue. On 26th February 1891 Champ Kuar adopted a son, Manmul, who married Sada Kuar. On 5th June 1895 Manmul died without issue, but he was survived by his widow. In the month of August 1896, Sada Kuar contemplated adopting one Sohanmull and on the 25th of that month she entered into an agreement with the father of Sohanmull under which she was to make the adoption, but it was not to operate to divest her of the estate which had devolved upon her on her husband's death. On 3lst August 1896 Sada Kuar adopted Sohanmull. He died in the month of July 1915. On 14th April 1918 Sada Kuar gave the business and its assets to her daughter-in-law Udai Kuar. In the month of May 1918 Udai Kuar adopted Mohanmull, the assessee in this case. Mohanmull married Naini Kuar and by her has two sons (Ratanchand and Parasmal) and two daughters (Lod Kuar and Kamal Kuar.) Sada Kuar died in 1923. In October 1930 Udai Kuar gave to each of her grandsons Rs. 150,000 and to their mother, Naini Kuar, Rs. 100,000. Udai Kuar died in 1931. Mohanmull, his wife and children are still alive. With the monies given to them by their grand-mother the businesses now carried on under the styles of M. Ratanchand and M. Parasmal respectively were started and with the Rs. 100,000 which Naini Kuar received the business now standing in her name was launched. Mohanmull succeeded to the main business of Sha Agarchand Manmull on the death of Udai Kuar in 1931.
3. From 1931 until the assessment year 1939-40 the four businesses were assessed separately to income-tax. In that year the Income-tax Officer held that the four businesses were really one and carried on by the joint family of which Mohanmull was the head. The Income-tax Officer formed the conclusion that with a view to the evasion of taxation at the appropriate rate Mohanmull had started three subsidiary businesses and had kept separate sets of books in respect of each of them, though they were in reality parts of the main business. This finding was reversed on appeal by the appellate Assistant Commissioner. The appellate Assistant Commissioner was of the opinion that it was not a matter of attempting to evade the payment of tax at the approximate rate. The businesses were separate and they had been rightly assessed separately from 1931 onwards. The Commissioner of Income-tax appealed to the income-tax appellate tribunal which agreed with the appellate Assistant Commissioner. The findings of the tribunal are summarised in para. 7 of the statement of the case as follows:
(a) The respondent though a Jain was governed by the Hindu law. (b) Sada Kuar when she got her husband's property on his death took it as her absolute property and that when she adopted Sohanmal her estate was divested and vested in the adopted on (c) The ante-adoption agreement of 25th August 1896 taking away the rights of the adopted son in the estate was void, (d) After the adoption of Sohanmal, Sada Kuar not being the absolute owner of the property had no right to mate a gift of it to Udai Kuar and after the death of Sohanmal, Udai Kuar herself in her own right as the widow of Sohanmal became entitled to the property. (e) On the adoption of Mohanmal he became the owner of the property and divested Udai Kuar of the estate that was vested in her before his adoption. (f) Sohanmal during his lifetime and Mohanmal from the date of the adoption to the date of Udai Kuar's death in April 1931 accepted the position that Sada Kuar and Udai Kuar were each in their turn the absolute owners of the property and acted accordingly. (g) Though it may be said that the properties belonged to a Hindu undivided family yet inasmuch as the parties have themselves accepted their rights on the basis of the gifts, it is not possible to say now that the property is the joint family property. (h) The Income-tax Department cannot claim or allocate the rights of parties after a lapse of 45 years in a manner which the parties themselves do not claim.
4. It is unnecessary to inquire whether the law which applies to this community of Jains is as stated by the tribunal. What the Court is concerned with is whether the gifts made by Sada Kuar and Udai Kuar were bona fide transactions and were accepted by the members of the family. The finding of the tribunal is that they were bona fide transactions and that they have been accepted as being valid by the family. It follows from what the tribunal has said in its order on the appeal from the appellate Assistant Commissioner that the businesses carried on in the names of the two grandsons and the daughter-in-law of Udai Kuar are genuine businesses and are not parts of the business carried on by Mohanmull. It was open to the members of the family to accept the gifts made by Sada Kuar and Udai Kuar as being valid and binding on them. Mohan-mull, the person most concerned does not challenge the validity of the gifts and it is not open to a third party to do so. If the three minor businesses were in fact parts of the main business and had been merely started with a view to evade taxation, the position would have been different, but that is not the position as found by the tribunal which is the final arbiter on questions of fact. The tribunal found that the action of the department up to the year 1938-39 was on the facts correct and therefore decided the appeal against the Commissioner. In these circumstances, the question referred must be answered in the negative. The respondent is entitled to his costs which we fix at Rs. 250.