RAJESHWAR PERSHAD Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The assessed in both (sic) these Income Tax references is an HUF. It originally consisted of Lala Sharan Bihari Lal and his son, Rajeshwar Pershad. Smt. Yeshwant Kumari is the wife of Rajeshwar Pershad and at the relevant time they had a son. It is stated that Lal Sharan Bihari Lal and Smt. Yeshwant Kumari had got separated from the joint family. But this aspect of the matter is not relevant and we can proceed on the footing that the joint family consisted of Rajeshwar Pershad, his wife and his son. The question which arises in these references is as to whether a sum of Rs. 9,000 received by Rajeshwar Pershad from a private limited company known as Vijay Shri P. Ltd. should be treated as his individual income or whether it was rightly included by the ITO in the assessments of the family which is the present assessed. The assessment years in question are 1970-71 and 1971-72, for which the relevant previous years are the financial years 1969-70 and 1970-71, respectively. Rajeshwar Pershad received a salary of Rs. 1,500 p.m. from the above company with effect from 1st October, 1969. He continued to receive the above remuneration until there was a partial partition on 3rd October, 1970. That is how the amount in dispute in each of the references in only Rs. 9,000.

(2.) Vijay Shri P. Ltd. was carrying on the business of exhibition of films and running the Liberty Cinema in Delhi. Till 1962 the assessed-family had nothing to do with the company. Subsequently the family acquired the share of the company. In November, 1962, the family invested Rs. 27,000 in shares of the Company. In November, 1965, there as a further investment of Rs. 1,00,000. In December, 1967, there was another investment of Rs. 2,00,000. Thus, the family held shares in the company to the extent of Rs. 3,27,000 out of a total capital of Rs. 5,00,000. The other shares in the company were held by Lala Sharan Bihari Lal and Smt. Yeshwant Kumari who, it is common ground, had acquired 1,330 and 400 shares, respectively, in the company out of their separate funds.

(3.) Thus, on the one hand, the family invested a little more than Rs. 3,00,000 in the company. Even this had been really a conversion of an advance which had been granted to the company by the family in 1964. The family had lent Rs. 3,00,000 in 1964 to the company on interest at 18% p. a. But slowly, as we have pointed above, the company converted business. A copy of the account of the company in the books of the family had been exhibited before the assessing authorities. It shows that the company was indebted to the family in the sum of Rs. 2,21,637 as on March 31, 1967. Thereafter, the position got completely reversed. On 31st July, 1967, the assessed-family withdrew a sum of Rs. 2,00,000 from the company. Some time in December, 1967, the company purchased a bungalow in Greater Kailash for a sum of Rs. 3,24,000. Primarily to meet the purchase consideration, the assessed withdrew various amounts aggregating to Rs. 2,87,101 from the company between October and December, 1967. These withdrawals made the assessed a debtor to the company in place of the favorable balance which existed earlier. Thereafter, more and more amounts were withdrawn by the family from the company, As on March 31, 1969, the family was indebted to the company to the extent of Rs. 2,00,114.50. As on 25th September, 1969, the balance was Rs, 2,53,863 and it increased further to Rs. 3,47,300 by March 31, 1970.