DESAI, J. - (1.) THIS is a reference made by the Tribunal, Bombay Bench "B", under S. 66(1) of the Indian IT Act, 1922. Before setting down the question referred to us, a few facts may be stated :
(2.) IN this reference we are concerned with the asst. yrs. 1942 43 to 1947 48 and 1952 53 to 1958 59, the corresponding accounting periods being S.Y. 1997 to S.Y. 2002 and S.Y. 2007 to S.Y. 2013, respectively. There were two sets of appeals before the Tribunal, one set arising out of the original assessments and the other, against the re assessments made under S. 34 of the Indian IT Act, 1922, as a result of certain proceedings before the IT Investigation Commission. The quantum was not in dispute in the appeals and the short question that was agitated before the Tribunal and which arises for consideration in the reference before us was whether the income from the firm of M/s Teju Kaya & Co. pertaining to the share of Shri Khimji Teju Kaya was the individual income of the said Shri Khimji or the income of a HUF of which Shri Khimji Teju Kaya was the Karta. The assessee desired that the status should be accepted as an individual as against the Department's contention that the income should be clubbed with and assessed in the hands of the HUF of Shri Khimji Teju Kaya as its income. The late Rao Saheb Teju Kaya acquired by his own exertions large properties, both movable and immovable. The fact that alI the properties earned by him were his self acquired properties was not in dispute. At the time of his death on April 24, 1928, he was a partner in the firm of M/s Teju Kaya & Co. There were two other partners, one of them being his son in law. The shares of the three partners were : Teju Kaya, Rs. 0 6 3, Nensi Bhojraj, Rs. 0 5 6 and Devji Dharsi Rs. 0 4 0. The balance of 3 pies was for charity. The business of the firm was principally that of contractors and this firm came into existence on October 24, 1919, though the partnership deed itself was executed on October 12, 1926. Teju Kaya left behind him a son and a widow. At the time of Teju Kaya's death his son was a minor and Teju Kaya's widow, Vejbai, became a partner in the firm of M/s Teju Kaya & Co. under the deed of partnership dated January 30, 1929, a copy of which is annexed as annexure "A" to the statement of case. The partners in this partnership were Devji Dharsi, Nensi Bhojraj and Vejbai. Khimji thereafter attained majority. A new partnership deed was made which was dated February 4, 1937. Under this deed, the partners were Khimji Teju Kaya, Nensi Bhojraj, Meghji Ravji and Bhanji Monji. A copy of this deed of partnership is annexed to the statement of case as annexure "B". Under this deed, there was a specific provision in cl. 25 for Khimji being exclusively entitled to the goodwill of the business. It has been observed by the Tribunal in the statement of case that when Khimji became a partner in the place of his mother, there was a debit balance in the account of the late Teju Kaya amounting to Rs. 92,000, whereas Vejbai's account showed a credit balance of Rs. 74,860. When Khimji became a partner, these two accounts were merged and transferred to the newly opened account in the name of Khimji Teju Kaya.
(3.) FROM the years 1938 39 to 1943 44, the share income from this firm was being assessed in the hands of the HUF on the basis of the returns filed by the assessee, Khimji Teju Kaya, as its Karta. The income from the firm as well as other income from the properties were all shown as property of the family of which Khimji was the Karta. For the year 1943 44, however, there was a contention raised before the AAC in the appeal for the year which was to the effect that the income really belonged to the individual and not to the family. The AAC did not allow this ground to be taken in appeal. Returns for the years up to 1947 48 were originally filed showing the status as HUF. However, revised returns were filed for the years 1944 45 to 1947 48 claiming that the share income did not belong to the HUF but only to Khimji Teju Kaya, an individual. The contentions to this effect based on the provisions of Hindu law were made before the ITO but were rejected by the ITO. The matter was carried in appeal to the AAC where these contentions were repeated. In the memorandum of appeal before the AAC a will dated September 4, 1927, left by Rao Saheb Teju Kaya was referred to and the will was produced before the AAC. A copy of this will is annexed as annexure "F".;