Dipak Kumar Sen, J. -
(1.)THE facts found and/or admitted in this reference at the instance of the assessee, Messrs. Y. L. Agarwalla and others, as appearing from the statement of the case and the annexures thereto may be shortly stated as follows :
One Yudhisthir Lal Agarwalla was the karta of a Hindu undivided family known as M/s. Y. L. Agarwalla and Co. Yudhisthir Lal during his lifetime used to carry on business in his capacity as the karta of the said undivided family in partnership in the name and style of M/s. Grand Smithy Works along with S. C. Lall, R. Garodia and T. R. Budhia. THE share of Yudhisthir Lal in the partnership was 36 per cent. of the profits and losses.
(2.)CLAUSE 13 of the deed dated the 20th September, 1961, under which the said partnership of M/s. Grand Smithy Works used to be carried on provided as follows:
"That the death or retirement of any of the partners shall not have the effect of dissolving this co-partnership between surviving partners ; in such an eventuality the co-partnership business may be carried on between the surviving partners and the heir/heirs, legal representative/representatives, assign/assigns, etc., of the deceased and/or retired partner or if mutually agreed upon between the surviving partners and heirs, etc., of the deceased and/or the retiring partner with outsiders also."
Yudhisthir Lal died on the 18th December, 1967, and the partnership firm closed its accounts on the same date, i.e., 18th December, 1967. A new deed of partnership was executed on the 11th January, 1968, with retrospective effect from the 19th December, 1967. Under this new deed, three minor sons of Yudhisthir Lal were admitted to the benefits of the partnership with 14% share each in the profits of the firm. Clause 6 of the new deed provided as follows :
"That the capital of the partnership shall be the amounts as will be found to the credit of the parties hereto of the first, second, third parts and the said Yudhisthir Lal Agarwalla since deceased."
In the relevant assessment year, i.e., 1969-70, Bhagwati Debi Agarwalla, the widow of Yudhisthir Lal, filed a return disclosing income from the partnership firm, Grand Smithy Works from 1st September, 1967, to 18th December, 1967, only, that is up to the date of death of Yudhisthir Lal. It was claimed that with effect from the 19th December, 1967, the Hindu undivided family which after the death, of Yudhisthir Lal was being managed by her, had no interest in the partnership and that her three minor sons had been individually admitted to the benefits thereof. This contention was not accepted by the Income-tax Officer who included the share of profits accruing to the three minor sons of Yudhisthir Lal for the period 19th December, 1967, to the 31st August, 1968, in the computation of the income of the Hindu undivided family.
(3.)ON appeal the Appellate Assistant Commissioner agreed with the decision of the Income-tax Officer. The assessee went up on further appeal before the Tribunal. It was contended before the Tribunal that, in law, a minor could not represent the Hindu undivided family. It was contended that taking into account the fact that the widow and the other married daughters of the deceased did not remain connected with the partnership firm it ought to be held that the minors having been admitted to the benefits of the partnership were, in law, alone entitled to the share of profits from the firm. It was contended that the Hindu undivided family did not become a partner either legally or factually.
It was contended on behalf of the revenue, on the other hand, that the capital of the Hindu undivided family continued to stand in the partnership in the name of late Yudhisthir Lal and was utilised free of interest. In that background the minors having been admitted to the benefits of the partnership it ought to be held that they represented the Hindu undivided family in the partnership.