KOTHA GOVINDARAJULU CHETTIAR Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee was the manager of a Joint Hindu family the members of which carried on a money-lending business. On 20th April 1940 a partition was effected, but the erstwhile coparceners decided to continue the business in partnership. A formal deed embodying the terms of separation was executed on 10th May 1940. THE joint family consisted of an uncle and two nephews. Although as members of the joint family they had equal shares in the business, it was agreed that the uncle, who had been the managing member, should have a larger share than each of his nephews. THE ratio was to be 26:19:19. For the year of account (1939-40) the Income-tax Officer calculated that the income of the family was Rs. 46,127, of which Rs. 44,420 had been derived from the business. By consent the year of account was deemed to commence on 13th April 1939 and to end on 20th April 1940. THE extra days were added in order that the end of the financial year should coincide with the date of the partition. THE total tax due on this assessment was Rs. 6129, which the Income-tax Officer directed should be recovered equally from each of the three groups into which the family had been divided. THE assessee was the managing member and as such he objected to the assessment. THE business had been assessed under the Income-tax Act of 1918. He claimed that the partnership had succeeded to the business of the joint family within the meaning of Section 26 (2) of the present Act, and therefore the joint family was entitled to the relief contemplated by Section 25 (4). Belying on the decision of this Court in Thontepu Chinna Pullayya v. Commissioner of Income-tax, Madras( 36) 9 I.T.C. 377 the Income-tax Officer rejected the contention. THE judgment in that case rendered full support for his action. He was asked to ignore the judgment because other High Courts had taken a different view. As he was functioning within the jurisdiction of the Madras High Court, the Income-tax Officer very properly considered himself to be bound by that case. THE appellate Assistant Commissioner upheld the decision of the Income-tax Officer, as did the Income-tax Appellate Tribunal, Calcutta Bench. At the request of the assessee and, in view of the conflict disclosed by the reported cases, the tribunal referred the following question for the opinion of this Court:

(2.) THE earlier case on which Thontepu Chinna Pullayya v. Commissioner of Income-tax, Madras( 36) 9 I.T.C. 377 is based is Jupudy Kesava Rao v. THE Commissioner of Income-tax, Madras( 36) 23 A.I.R. 1936 Mad. 67. THEre an undivided Hindu family consisted of the assessee, his wife and his father. THEy carried on a family business and after the father s death the assessee continued it. THE question was whether it could be said that the assessee had succeeded to the business within the meaning of Section 2G (2). It was held that he was not within the section. In delivering the judgment of the Court, Madhavan Nair J. who was officiating as the Chief Justice, observed: