1. This is a case stated by the Chief Commissioner of Income-Tax to tae High Court under Section 51 of the Income Tax Act, VII of 1918, read with Section 6 of the Super Tax Act 1920. The question for decision is whether the assessees who are the registered firm of M. Doraiswamy Aiyangar & Bros., are assessable to super tax as an undivided Hindu family and the specific questions put to us are as follows:
(1) Does the registration of the brothers as a firm as defined under Section 2(12) of Act VII of 1918 preclude the assessment of the family as an undivided family to super-tax or the income derived from the business of this firm?
(2) If not, does the mere constitution of a partnership between some members of the family by a formal document preclude the assessment of the income of the partnership to super-tax as part of the income of the undivided family?
2. When this case first came before us, we thought it necessary to have more in, formation than was afforded to us by the original case stated and, therefore, referred the case back for a raiding of fact as to whether the original capital of the firm was wholly or in part derived from joint family funds. The answer to that is to be found in the Commissioner's letter dated the 5th August 1922, the concluding paragraph of which runs as follows:
On the whole, no adequate evidence has been adduced which would enable one to record a finding as a fact whether the original capital of the firm was wholly or in part derived from joint family hinds.
3. To that is appended the following statement:
It can only be inferred from the conduct of the assesses and all the circumstances of the case that appellants intended to trade as a joint family and did trade as such.
4. We desire to say with regard to this last statement that it is in no way relevant to anything that we referred back to the Commissioner and that we decline to treat it as a finding of fact, by which we are bound in framing our answer to the questions referred to us. It appears to us to be a deduction of law from known circumstances rather than a finding of fact but, in any event, we disregard it as being in no way called for in connection with the matter that has been referred. In any event, it is vitiated by the laxity of reasoning which led up to and is evidenced by the language in paragraph (3) of the same document in which it is said that the four brothers practically form the joint family.' A Joint family consist? of certain definite persons arid a given individual must either if member of it or not, The general legal position appears to us to be beyond doubt. Members of a joint family may engage in trade in such a way as to embark on the adventure funds of the joint family and pledge its credit to their undertaking. On the other hand, the members of a joint family may embark on a trade without involving the funds of the joint family in it, and in that event, their profits as traders would be self-acquisitions and 'the' losses would not be recoverable from the joint family property. The members who actually take part in the trade may enter into a deed of partnership between themselves or between themselves and a stranger partner, which, of course, would regulate their dealings inter se and with the stranger partner but need not necessarily affect the question as to whether and how far the property of the joint family is to be regarded as involved in the adventure. It is not conclusive to show that some funds of the joint family were invested in the trade, because they might have been borrowed by the trading members as a loan of a definite sum to be re-paid by the trading firm just as if it was a loan from strangers. In the present case the accounts appear to show that such a course has been pursued here and that the amounts advanced by Mr. M. Ananthachariar, the father of the assesses, and apparently the manager of the joint family of which they are all admittedly members, were treated as a mere loan for the purpose of the business to be re-paid with interest in the ordinary way and not as an indication that the business was conducted as a joint family business. But that is a question of fact and inference which is primarily at least for the determination of the Commissioner and not of this Court. We, therefore, answer the questions put to us in the only way we can answer them on the materials before us.
(1) Yes, unless the firm so registered has been shown to carry on its business on behalf of and for the benefit of the joint family.
(2) The answer is in accordance with the preceding answer.
The mere constitution of a partnership between some members of the family will not preclude the assessment in cases where the partnership is conducted on behalf of and for the benefit of the joint family.
5. As we have been unable on the materials before us to give a final determination of the rights of the parties we make no order as to costs.