Rajagopalan, J. - (1.) KULANDAVELU Mudalier, the father of the assessee was an agent of Muller and Phips (India) Ltd., and he handled the sale of their pharmeutical preparations. He gave up that agency, and on July 1, 1937, the petitioner was appointed the company's agent.
(2.) KULANDAVELU died on 27th July, 1938. The assessee, the only son of KULANDAVELU, inherited from his father a house in Ayalur Muthiah Mudali St., a sum of Rs. 3,000 realised on insurance policies, and Rs. 600 refunded by the Income-tax Department. The case when into his banking account. On the death of KULANDAVELU, the assessee was the sole male member of his family. In the assessment year 1938-39 the assessee's claim was upheld, that his appointment as the agent of the company did not constitute any succession to any business of Kulandavelu and that the agency and the business that ensued constitued the separate requisition of the assessee independent of his father. The agency proved lucrative, and the assessee acquired properties, moveable and immovable. His first son was born on 11th August, 1944, and the second on 3rd September, 1945. Together they constituted a joint family. The only piece of ancestral immovable property was the house in Ayalur Muthiah Mudali Street. That was sold by the assessee in 1945, and with the sale proceeds another house No. 3, Varadarajulu Naidu Street, was purchased. The new house was thus the substituted ancestral joint family property of the assessee and his sons. The assessee maintained only one set of accounts, which included the income-first from the house in Ayalur Muthiah Mudali Street and then the house in Varadarujulu Naidu Street. But that income was comparatively very small. The bulk of the income was from the agency business. Till the assessment year 1952-53 the assessee was assessed in his status as an individual on his entire income including the small amount which he derived from the ancestral immovable property. On 19th December, 1952, the assessee effected a partition between himself and his minor sons. Provision was also made for the maintenance, education and marriage of his daughter Mahalakshmi, who was also a minor. The mother of the three minor children represented them in that transaction. The deed of partition has been appended as Annexure B to the statement of the case. In that deed of partition the assessee recorded : "Whereas the party of the first part (assessee) has been earning commission and acquiring property and blending his money with the assets inherited from his father and treating the entire properties extant before and after the birth of the parties of the second and third parts (sons) till this date as joint family property without making any discrimination or distinction." The moveable and immovable properties set out in Schedule A valued at Rs. 49,655 were allotted to the share of the assessee. The moveable and immovable properties valued at Rs. 83,650 were allotted to the share of the elder son Selvakumar. The moveable and immovable properties valued at Rs. 1,20,000 were allotted to the share of the second son, Rajkumar. The amount of Rs. 61,410 in fixed deposit was set apart for the maintenance, clothing, education and marriage expenses of the daughter Mahalakshmi. It should be noted that the agency business itself was not made the subject matter of the partition. It continued with the assessee, and continued to be his separate property.
(3.) IN the assessment year 1953-54 for the account year ending with March 31, 1953, the assessee claimed that the entire income of the properties dealt with in the partition deed belonged to the joint family of himself and his sons upto 19th December 1952, and that thereafter he was liable to be assessed only on the income from the properties that came to his share under the deed of partition. The Income-tax Officer held that the only piece of joint family property was the house in Varadarajulu Naidu Street. The Income-tax Officer assessed the assessee in his status as an individual, as he had all along been assessed from 1938-39. The income from the house in Varadarajulu Naidu Street, which was treated an ancestral joint family in the hands of the assessee, was excluded. On the rest of the income, the income from the business and the income from all the properties shown in Annexure B, the assessee was assessed. The Income-tax Officer was of the view, that there was no proof of any merger of the self-acquired properties of the assessee to his minor children, and that the income from the transferred assets was assessable in the hands of the assessee under S. 16(3)(a)(iv). The assessee's appeal to the Assistant Commissioner failed. The Assistant Commissioner took the view that the deed of partition could not be acted upon, and that the income from all the properties belonged only to the assessee. Once again we should emphasise that the assessee income excluded the income from the ancestral joint family property, the house in Vadarajulu Naidu Street. The Assistant Commissioner did not go into the question whether the deed of partition dated 19th December, 1952, constituted a transfer, and whether the provisions of S. 16(3)(a)(iv) applied. ;