- (1.) This is an appeal by special leave from the judgment and orders of the High Court of Bombay dated 16-2-1955, in a reference under S. 66 (1) of the Indian Income-tax Act, 1922, hereinafter called the Act. The reference was made in the following circumstances.
(2.) The Hindu undivided family of one Gandalal carried on business in cloth in Wadhwan in Kathiwar, which at the relevant time was outside British India. The family consisted of Gandalal and his four sons, (1) Girdharlal, (2) Hansrai, (3) Nandlal and (4) Ramniklal. In 1944 Nandlal came to Bombay and started a cloth business in partnership with other persons, the partnership being known as Amulakh Amichand and Co. Nandlal's share in the partnership was ten annas and that of his three partners, who belonged to the family of Amulakh Amichand, six annas. It was stated that the family of Amulakh Amichand which was a well known business family of Bombay, did not supply and capital to the partnership and Nandlal alone was the financing partner. On 13-4-1944, Nandlal received a sum of Rs. 50,000 from the Hindu undivided family of which he was a member, and a further sum of Rs. 50,000 on 27-4-1944. Two other sums aggregating Rs. 50,000 were also received from the Hindu undivided family on 8-6-1944 and 29-6-1944. The case of the assessee was that a sum of Rs. 1,00,000 was given to each son by the father and the sums of money received on June 8, 1944 and June 29, 1944, were a loan by the Hindu undivided family to Nandlal. Therefore, the case of the assessee was that Nandlal became the partner of the firm of Amulakh Amichand in his individual capacity.
(3.) The case of the Department, however, was that the total sum of Rs. 1,50,000 sent to Nandlal by the Hindu undivided family was utilised as capital in the cloth business of the partnership known as Amulakh Amichand and Co. Subsequently, Girdharlal, another brother of Nandlal, came to Bombay and joined the firm. Out of the share of ten annas of Nandlal, Girdharlal was given a share of five annas. The partnership firm of Amulakh Amichand and Co., then started a cloth business at Banaras, and the partners of the firm at Banaras were the partners of the Bombay firm of Amulakh Amichand and Co., and an outsider from Banaras. A third brother of Nandlal also joined the Banaras firm, but he did not bring any capital.;