JAGANNATHRAM GANGARAM Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF ORISSA
COMMISSIONER OF INCOME TAX
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RAY, J. -
(1.) THIS case was heard on 22 -3 -1950 and its result was then communicated after close of the hearing. We reserved deliverance of our judgment incorporating the reasons.
(2.) THIS is a motion by an assessee, a Hindu undivided family, invoking our jurisdiction to issue a writ requiring the Appellate Tribunal (income -tax) to state a case and to refer the same to the Court in the
event of our not being satisfied of the correctness of their decision in rejecting the assessee's appeal and in
refusing to state a case to this Court. For the reasons stated below, we are not satisfied with the decision
of the Tribunal as correct.
The facts that constitute the background In which the correctness of the Tribunal's decision has to be considered are that one Jagannathram and his five sons E(i) Gangaram, (ii) Ramanarayan, (iii) Bhagawan,
(iv) Kanhialal and (v) Surajmal constituted a joint family. The family owned extensive properties, both
movables and immovables, inclusive of two business concerns in Yarn and Timber. Indisputably the
family continued joint till 9 -11 -1942, the date of commencement of the accounting period 1942 -43 the
period ends on 28 -10 -1948. Before that date two of the aforesaid sons had died. Of them late
Ramanarayan has left behind a widow and late Bhagwan a son by name Satyanarayan, a minor who is a
member of the joint family. It is claimed by the assessee that on 9 -11 -1942, the members of the family
under the leadership of Jagannathram ascertained the shares of the family members, namely,
Jagannathram, his three sons and the son of a predeceased son, to be l/5th each in the joint family assets.
They separated the aforesaid two businesses of Yarn and Timber from the joint family and divided the
same amongst five members allotting the timber, business to Jagannathram and Satyanarayan and the
Yarn business to the shares of Gangaram, Kanhialal and Surajmal. The bone of contention is that since
that date these two business concerns ceased to be joint family properties and became the separate
properties of the members to whom they were allotted and held, inter se, 'in common tenancy' and distinct
from 'in coparcenary'. In order to carry out the purpose of the said division, two deeds of partnership
agreements were brought into being -one was executed and entered into between Gangaram, Kanhialal
and Surajmal governing the Yarn business which had been taken out of the joint family assests and
allotted to them as a part of their share in the joint family properties and the other was similarly executed
and entered into as between Jaganathram and Satyaranayan covering Timber business. Each of the two
documents with material variations as were appropriate in relation to the business which it was intended
to govern contained a recital giving out the fact of partition of the joint family and formation of
partnership firms. Foe the sake of perspicuity, the following quotation may be taken from one of said two
'The aforesaid Jagannathram, Gangaram, Kanhialal, Surajamal and Satyanarayan minor through guardian Jagunnatharam on 8 -11 -42 mutually agreed and decided that their share in the entire joint family properties is equal i.e., 1/5th share each and in pursuance of the same they further decided to divide their joint family business in Twist and Timber in the same proportion and further decided that the Twist business with a capital of Rs. 105,000 will fall to the lot of Gangaram of the first party, Kanhialal, Surajmal of the second and third party, each being deemed to have contributed and contributing Rs. 35,000 as his share capital and which they will run in patnership to the exclusion of jagannath and Satyanarayan and similarly timber business with capital of Rs. 70,000 will fall to the lot of Jagannathram and Satyanarayan minor through guardian Jagannathram each being deemed to have contributed Rs. 35,000 as his share capital and which the latter two alone will run in partnership under the name of Jagannathram Satyanarayan to the exclusion of the former, namely, Gangaram, Kanhialal and Surajmal, and all the members further decided that their remaining properties, namely, their landed properties, buildings and all other movables and immovables will continue as joint as before under the name of Jagannathram Gangaram and with this clear understanding that they are separate be far their twist basinass is under the name of Kanhialal Surajmal and timber business under the name of Jagannathram Satyanarayan with the specification of shares and contribution of capital as enumerated above are concerned and they are joint as regards the remainder of the joint family property......'
(3.) ON execution of the aforesaid two documents, the parties approached the Registrar of firm and secured certificate of registration in March 1914, This was followed by correspondence to the Commilla Bank and
to a supplier of Yarn in the years 1944 and 1945 respectively stating that the two trades referred to therein
were being run as partnership Firms as between the different groups of persons named in the partnership
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