CHAANDAS HARIDAS Vs. COMMISSIONER OF INCOME TAX BOMBAY NORTH KUTCH AND SAURASHTRA AHMEDABAD
LAWS(SC)-1960-3-30
SUPREME COURT OF INDIA (FROM: BOMBAY)
Decided on March 15,1960

CHAANDAS HARIDAS Appellant
VERSUS
COMMISSIONER OF INCOME-TAX, BOMBAY NORTH, KUTCH AND SAURASHTRA, AHMEDABAD Respondents


Referred Judgements :-

P K P S PICHAPPA CHETTIAR VS. CHOKALINGAM PILLAI [REFERRED]



Cited Judgements :-

COMMISSIONER OF INCOME TAX BOMBAY CITY II VS. SHAKUNTALA [LAWS(SC)-1961-7-12] [REFERRED]
COMMISSIONER OF INCOME TAX MADRAS IN ALL APPEALS VS. BAGYALAKSHMI AND CO UDAMALPET IN ALL THE APPEALS [LAWS(SC)-1964-11-21] [RELIED ON]
AGARWAL AND CO VS. COMMISSIONER OF INCOME TAX [LAWS(ALL)-1967-1-22] [REFERRED TO]
AGARWAL AND CO VS. COMMISSIONER OF INCOME TAX LUCKNOW [LAWS(ALL)-1967-9-4] [REFERRED TO]
SHIV NARAIN AGARWAL VS. COMMISSIONER OF INCOME TAX [LAWS(ALL)-1980-7-81] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. DHARAM PRAKASH [LAWS(ALL)-2004-8-171] [REFERRED TO]
RAMAKRISHNA TRANSPORTS KALAHASTI VS. COMMISSIONER OF INCOME TAX ANDHRA PRADESH HYDERABAD [LAWS(APH)-1966-7-26] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. KRISHNA MURTHY A [LAWS(APH)-1977-9-1] [REFERRED TO]
RADHA KRISHNA JALAN VS. COMMISSIONER OF INCOME TAX [LAWS(GAU)-2007-8-41] [REFERRED TO]
J SNANMUKHESWARA RAO VS. T VENKATAPPAIAHAND SONS [LAWS(APH)-1985-12-16] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. RATANCHAND DARBARILAL [LAWS(MPH)-1973-4-9] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. NARBHARAM POPATBHAI AND SONS [LAWS(MPH)-1986-11-6] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. NARBHARAM POPATBHAI AND SONS [LAWS(MPH)-1986-11-16] [REFERRED TO]
COMMISSIONER OF WEALTH TAX VS. J K K ANGAPPA CHETTIAR [LAWS(MAD)-1978-2-26] [REFERRED TO]
COMMISSIONER OF INCOME TAX BOMBAY CITY BOMBAY VS. NANDILAL GANDALAL [LAWS(SC)-1960-4-8] [REFERRED]
JITMAL BHURAMAL VS. COMMISSIONER OF INCOME TAX BIHAR AND ORISSA [LAWS(SC)-1962-2-44] [AFFIRMED]
SAIT NAGJEE PURUSHOTHAM AND CO CALICUT VS. COMMISSIONER OF INCOME TAX MADRASNOW KERALA [LAWS(SC)-1963-12-27] [REFERRED]
MURLIDHAR HIMATSINGKA VS. COMMISSIONER OF INCOME TAX CALCUTTA [LAWS(SC)-1966-7-3] [REFERRED]
KALLOOMAL TAPESWARI PRASAD HUF KANPUR COMMISSIONER OF INCOME TAX KANPUR VS. COMMISSIONER OF INCOME TAX KANPUR: KALLOOMAL TAPESWARI PRASAD HUF KANPUR [LAWS(SC)-1982-1-30] [DISTINGUISHED]
APOORVA SHANTILAL SHAH HUF VS. COMMISSIONER OF INCOME TAX GUJARAT 1 AHMEDABAD [LAWS(SC)-1983-3-2] [FOLLOWED]
COMMISSIONER OF INCOME TAX VS. RAMDAYAL GHANSIRAM AND SONS [LAWS(APH)-1961-10-10] [REFERRED TO]
COMMISSIONER OF INCOME-TAX VS. LAXMI DYEING AND FINISHING FACTORY [LAWS(P&H)-1985-11-14] [REFERRED TO]
P.V. THAKAR VS. COMMISSIONER OF INCOME TAX [LAWS(GJH)-2008-6-90] [REFERRED TO]
N.A. PERIANNA CHETTIAR (DIED) AND ORS. VS. SOORA RADHAKRISHNA CHETTI AND ORS. [LAWS(MAD)-1978-4-39] [REFERRED TO]
RAMDAYAL GHANSIRAM & SONS VS. COMMISSIONER OF INCOME [LAWS(APH)-1960-12-36] [REFERRED TO]


JUDGEMENT

HIDAYATULLAH - (1.), J. : This is an appeal with the special leave of this Court against the judgment and order dated 16/02/1955, of the High Court of Bombay in an Income-tax Reference under S. 66 (2) of the Indian Income-tax Act.
(2.)THE appellants are two assessees, Charandas Haridas and Chinubhai Haridas, whose cases are identical and in fact there was a consolidated reference by the Income-tax Appellate Tribunal, which was answered by the High Court by its judgment. THE respondents are respectively the Commissioner of Income-tax, Bombay North, Kutch and Saurashtra and the Commissioner of Income-tax, Delhi, Ajmer, Rajasthan and Madhya Bharat. THE two appellants represented two units of Hindu undivided families. Charandas Haridas represented his wife, three sons and himself, and Chinubhai Haridas represented his wife, son and himself. In stating the facts relative to the two families, it will not be necessary to give them separately, because the question which was answered by the High Court in the judgment under appeal arose in identical circumstances in the two families. THE only difference is in the shares held respectively by the two Hindu undivided families in the managing agencies to be hereafter mentioned. We will, therefore, confine ourselves to a statement of the facts relating to Charandas Haridas only.
Charandas Haridas was the Karta of the Hindu undivided family consisting of his wife, three sons and himself. He was a partner in six managing agency firms in six Mills. In previous years, the income received by him as partner in these managing agencies was being assessed as the income of the Hindu undivided family. On 31/12/1945, Charandas Haridas acting for his three minor sons and himself and Shantaben his wife, entered into an oral agreement for a partial partition. By that agreement Charandas Haridas gave a one pie share to his daughter, Pratima, in the managing agency commission from two of the six managing agencies held by the family. The balance together with the shares in the other managing agencies was divided into five equal shares between Charandas Haridas, his wife and sons. This agreement was to come into effect from 1/01/1946, which was the beginning of a fresh accounting year. On 11/09/1946, Charandas Haridas acting for himself and his minor sons, and Shantaben executed a memorandum of partial partition in which the above facts were recited, the document purporting to be a record of what had taken place orally earlier.

In the assessment years 1947-1948 and 1948-1949, Charandas Haridas claimed that the income should no longer be treated as the income of the Hindu undivided family but as the separate income of the divided members. The Income-tax Officer declines to treat the income as any but of the Hindu undivided family, and assessed the income as before. An appeal to the Appellate Assistant Commissioner was unsuccessful, and the matter was taken to the Income-tax Appellate Tribunal. The Appellate Tribunal held that by the document in question, the division, if any, was of the income and not of the assets from which the income was derived, inasmuch as "the agreements of the managing agency with the managed Companies did not undergo any change whatever as a result of the alleged partition". The Appellate Tribunal, therefore, held that the arrangement to share the receipts from this source of income was not binding on the Department, if the assets themselves continued to remain joint. It further held that the document was "a farce", and did not save the family from assessment as Hindu undivided family. The Tribunal having declined to state a case under S. 66 (1) of the Indian Income-tax Act, Charandas Haridas moved the Bombay High Court, and obtained an order under S. 66 (2) of the Act. The question on which the case was stated was :

"Whether there were materials to justify the finding of the Tribunal that the income in the share of the commission agency of the Mills was the income of the Hindu undivided family?"

(3.)THE High Court stated that though the reference was very elaborately argued, it raised a very simple question of fact and all that it was required to find out was whether there were materials before the Appellate Tribunal upon which the finding of fact could be rested. THE High Court held that though the finding a given by the Appellate Tribunal could not be construed at a finding that the document was not genuine, the method adopted by the family to partition the assets was insufficient to bring about the result intended by it. According to the High Court, the Appellate Tribunal was right in holding that the document was ineffective, and though the income might have been purported to be divided and might, in fact, have been so divided, the source of income still remained united as belonging to the Hindu undivided family. It accordingly answered the question in the affirmative, holding that there were materials before the Tribunal on which it could reach the conclusion that in so far as these income-bearing assets were concerned, they still belonged to the Hindu undivided family. Leave to appeal to this Court was refused by the High Court but Charandas Haridas applied to this Court and obtained special leave, and the present appeal was filed.
Mr. Viswanatha Sastri appearing for Charandas Haridas, pointed out that a Hindu undivided family cannot be a partner of a firm. Charandas Haridas, therefore, though he represented the Hindu undivided family, in his capacity as a partner could not insist that the other member of the family be received as partners, or admitted to the benefits of partnership. The only mode in which the partition could be made was to divided the income, and this had the necessary effect, in law, of dividing the assets, if not for the purposes of the Partnership Act, at least for the purposes of assessing income-tax. He, therefore, contended that the Hindu undivided family which had ceased to exists in so far as these assets were concerned, could not be assessed as such after 1/01/1946, the date from which the partition was effective. The learned Solicitor-General for the Department contended that the argument itself involved the assumption that the assets were not, in fact, divided, and since income-tax was payable at the moment of time when income accrued, this income must be taken to have accrued to the Hindu undivided family and its subsequent partition into five or six shares did not affect the position.

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