ASHOKBHAI CHIMANBHAI HUF Vs. COMMISSIONER INCOME TAX AHMEDABAD

JUDGEMENT

(1.) This Reference under section 66(1) of the Indian Income Tax Act 1922 raises on interesting question of law. The assessee in this case is the Hindu undivided family of Ashokbhai Chimanbhai. The assessment year is 1956-57 the accounting period being Samvat Year 2011 i.e. the period commencing from 27th October 1954 and ending with 14 November 1955. Ashokbhai is the `Karta of this joint family. He has a wife by name Shobhanaben and a minor son by name Chirag. These three constitute the aforesaid joint family. At all material times Ashok- bhai was a partner in the partnership firm of Messrs Amrit Chemicals. He had a five annas share in the partnership. This share was held by him as the manager and Karta of the aforesaid Hindu undivided family.

(2.) The partnership was a partnership at will. The relevant accounting year of the partnership was the calendar year 1955 i.e. the year commencing from 1st January 1955 and ending with 31st December 1955. There was a partial partition of some of the assets of this Hindu undivided family effected by a deed of partition dated 12th November 1955. Under the terms of this deed of partition the five annas share and interest in the aforesaid firm which was held by Ashokbhai on behalf of the aforesaid Hindu undivided family came to the share of Ashokbhai the individual in his own right absolutely. At the time when the deed of partition was executed the accounts of the partnership firm of Amrit Chemicals had been made up upto the end of the calendar year 1954. In connection with the amount claimable in respect of the business done by the partnership after 1st January 1955 the deed of partition provided as under:-

(3.) The business of the partnership continued after the date of the deed of partition. The account of the profits of the partnership was made up for the partnerships accounting year 1955. The firm was a registered firm and being a registered firm the profits made by the firm were divided amongst all the partners for the purpose of assessing the same to tax. To the share of Ashokbhai came the sum of Rs. 21 385 2 3 Ashokbhai the individual showed this sum in his return as constituting his income The Income Tax Officer was unable to accept the claim of the assessee Hindu undivided family that the 5 annas share of the income of the firm of Amrit Chemicals should be excluded from the assessment of the Hindu undivided family on the around that Ashokbhai was deemed to be a partner of the firm in his individual capacity with effect from 1st January 1955 He treated the whole of this income as being the income of the assessee Hindu undivided family. The matter was carried to the Appellate Assistant Commissioner and thereafter the matter was taken in further appeal before the Appellate Tribunal. The Appellate Assistant Commissioner took the view that there was a change in the constitution of the firm on the partition of the Hindu undivided family property and that the provisions of section 26(1) would become applicable. He held that what could be assessee as income of the assessee joint family would only be the proportionate income for the period 1st January 1955 to 12th November 1955 and not for the full year from 1st January 1955 to 31st December 1955 The Appellate Tribunal held that the view of the Appellate Assistant Commissioner was correct when he included the proportionate income from the firm of Amrit Chemicals in the income of the Hindu undivided family of the assessee for the period 1st January 1955 to 12th November 1955 The assessee Hindu undivided family being aggrieved by that decision applied- to the Appellate Tribunal to refer a question of law that arose out of the order of the Appellate Tribunal to us. The Appellate Tribunal has accordingly referred to us the question following:-