S C MULLICK AND SONS Vs. STATE OF U P

JUDGEMENT

(1.) THIS is a reference by the Income Tax Commissioner under Section 66 of the Income tax Act. Before we state the question which we have to answer it is necessary to state such facts as will indicate the implications of those questions.

(2.) AT page 9 of the statement of the case will be found a pedigree. The common ancestor is one Lakhi Narain Mullick. One of his sons S. C. Mullick migrated from Bengal to Benares and there started hardware business, which proved to be lucrative and became the foundation of the fortune of the family. S. C. Mullick had two sons, A. D. Mullick and K. D. Mullick. S. C. Mullick died in 1930. His A. D. Mullick died in 1933. K. D. Mullick who is alive has two sons and A. D. Mullick has left 7 sons. Up to 1934 the entire family was treated for income tax purpose as a joint Hindu family governed by the Dayabhag schools of law and assessed as such. On the 14th July, 1934, a deed purporting to be one of partnership was executed by K. D. Mullick his two sons, and the seven sons of A. D. Mullick. The deed recites that when S C Mullick was settled down was a minor at the time, they started business as partners and that subsequently the sons of the two brothers were admitted into partnership and constituted a firm. The deed goes on to recited that the firm was reconstituted after the death of A. D. Mullick in 1933. Finally, the deed declares that the entire stock in trade of the hardware business belongs to a firm of which the executant thereof are partners. On 23rd July, 1934, K. D. Mullick applied under Sec. 26-A of the Income tax Act for registration of the firm. With the application the deed of partnership, already referred to, was filed. Though, to begin with, the controversy was in connection with application for registration, assessment proceedings appear also to have been taken and the question arose whether the income of the hardware concern should be considered to be the income of a firm of which S. C. Mullick descendants are partners, or the income of a joint Hindu family consisting of K. D. Mullick and the sons of A D Mullick. It was contended by the assessees that they were members of a firm; while the Income tax Department treated the income as that of a joint family governed by the Dayabhag school of law. The Assistant commissioner held that A D Mullick and K D Mullick and after the death of A. D. Mullick his 7 sons and K. D. Mullick were members of a joint Hindu family governed by the Dayabhag law and the assets of the hardware business were joint Hindu family property. He also held that the deed of partnership, dated 14th July 1934, represented a fictitious transaction. The Assistant Commissioner expressed the view that members of a joint Hindu family cannot become partners qua joint family property. The application for registration under Sec. 26-A was rejected. The reference before us was made by the Commissioner of Income tax at the instance of K. D. Mullick. The three questions which we are required to answer are as follows :-

(3.) HAVING answered the first question in the affirmative, we are clearly of opinion that the Additional Income tax Officer had evidence before him on which he could hold that no partition had taken place amount the members of the family.