Leonard Stone, Kt. , C. J. -
(1.)BEFORE embarking upon circumstances of this reference, I desire to draw. attention to the fact, that as long ago as August 16, 1940, the assessee made a petition for this matter to be referred, but in fact no reference was made until April 11, 1946, that is to say for a period of 5| years. No explanation is forthcoming as to why a delay of this magnitude should have taken place. It is a very shocking thing, that an assessee, who under the Indian Income-tax Act has to pay the full amount claimed, should have his petition to refer a qiiestion to the Court delayed in this way, and we draw the attention of the authorities concerned to it in the hope that such a delay will not occur again.
(2.)THE assessment year is the year 1939-40 in respect of the accounting year which is the Samvat year 1994, that is to say, in respect of the period November 4, 1937, to October 23, 1938. Mr. Haridas Purshottam, who was the assessee, lias, during the course of the long delay, died, and his son, who is now the Jiarta of the joint family in his father's stead, has been brought on the record.
During his lifetime Mr. Haridas filed two returns for income-tax purposes, one being in his personal capacity and the other being as karta of the joint family, consisting of himself and his four sons. The question which is now referred to us by the Commissioner is, whether, on the facts of this case, the share of the income from the managing agency of the Bharat Spinning & Weaving Company, Limited, received by Mr. Haridas Purshottam has been rightly treated as the income of the Hindu undivided family of which he is the hartal The Commissioner came to the conclusion that it was a joint family asset. The question in fact largely turns on the construction, which is to be put on certain documents to which I will refer.
There were three brothers one of whom was Mr. Haridas Purshottam, and they were separate, but each- of them was joint with his own sons. The three brothers formed a partnership, and it is admitted that Mr. Haridas Purshottam held his share in this partnership as karta. In the year, 1918 the three brothers and five other persons purchased the Hubli Mills in partnership. There is no deed of this partnership, but again there is no doubt, and it is not disputed, that Mr. Haridas Purshottam held his share in this partnership as karta of the joint family. In the year 1920 the three brothers and the five other persons promoted a company, being the Bharat Spinning & Weaving Company, Limited, to take over the Hubli Mills, and on March 8, 1920, the mill was in fact taken over. On July 21, 1920, two documents were executed. One of these was an agreement between the new company and the eight vendors, that is to say the three brothers and the five other persons, for the purchase of the mills. The three brothers received, by way of consideration, 1,000 shares in the new company and a sum of cash, and again there is no dispute that each brother held his 333 1/3 shares as Jcarta of his respective joint family. Clause 7 of this agreement is as follows: It is hereby expressly agreed that all benefits conferred upon the said firm (the three brothers and the five other persons) by these presents and all benefits conferred or to be conferred upon the said firm by the second agreement referred to in Article 150 of the articles of association of the company under which the said firm are appointed the agents of the company shall be cumulative and nothing in either of the agreements shall foe deemed or construed to in any way restrict the other of them.
(3.)THE other agreement is the one referred to in the clause I have just read. It is also dated July 21, 1920, and can be conveniently described as the managing agency agreement, it being made between the new company and the eight partners, whereby the eight partners became managing agents of the company. In this agreement there is the following recital : Whereas in consideration of the services rendered by the said firm (that ia to say the eight partners) in promoting and establishing the company and for divers other valid considerations and reasons, it is provided by the articles of association of the company that the said firm of Messrs. Purshottam Govindji & Company and the present member or members thereof or the members or sole member (as the case may be) for the time being constituting the said firm of Messrs. Purshottam Govindji & Company and their successors in business and assigns, notwithstanding any change to the constitution or the name or style of the said firm, shall be and are hereby appointed managing agents of the company for the period, and upon thejterms, provisions and conditions as to remuneration, management and otherwise set out in the agreement draft whereof is set forth in the schedule thereto.
Clause 5 of this agreement provides for the remuneration. Clause 14 is in, these terms: It shall be lawful for the said firm to assign the whole or any portion of their remuneration, without thereby in any way affecting or prejudicing their appointment as such managing agents as aforesaid.