R SUBRAMANIA IYER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us for decision under section 66(1) of the Income Tax Act, 1961 is :

(2.) FOR the assessment year 1948-49 the assessee submitted two returns, one as an individual wherein he returned an income of Rs. 50 being sitting fee received as a director, and another return as the manager of the joint family and in this capacity he returned the fourth share of the income which he got from the General Commercial Distributors. The Income-tax Officer refused to accept these returns and treated the income returned as the manager of the undivided Hindu family as part of the income of Subramania Ayyar, the individual assessee. The assessee was called on to explain how he treated himself as the manager of an undivided Hindu family in entering into this business. His explanation consisted of two parts. The first was that the sum of Rs. 350 which had been contributed by him as his share capital for the General Commercial Distributors was ancestral property which had been obtained by him from his father. The second was that the declaration contained in the recital in the partnership deed of April, 1947, in which he had described himself as the manager of the joint undivided Hindu family, was sufficient to impress upon the business the character of a joint family business, such that its income would become the income of a Hindu undivided family. The Income-tax Officer did not accept the case put forward by the assessee as regards the source from which the Rs. 350 had been obtained by him and he was of the opinion that this sum represented at the best a portion of the gifts from the assessee's father and mother which would be self-acquired property in his hands. Dealing with the effect of the declaration contained in the recital in the partnership deed of April, 1947, the Income-tax Officer held that this was not sufficient to constitute the business as one belonging to a undivided Hindu family.

(3.) IN the circumstances the reference to the undivided Hindu family in the deed of partnership must obviously refer only to the assessee and his minor son. The Tribunal did not anywhere point out that more was necessary besides the declaration in order to impress upon the assessee's share of the business the character of joint family property. It is also in evidence that the partnership which was brought into existence by a deed with this recital functioned, so that it is not merely a question of something having effect in futuro but a case where effect has been given to the intentions contained in the declaration. IN the circumstances the assessee must be held to have established that the profits derived by him from the General Commercial Distributors were received by him as the manager of the undivided Hindu family consisting of the assessee and his minor son, the recital in the deed of partnership together with the fact that the partnership has functioned is sufficient to lead to the inference that the share of the profits was received by the assessee as the manager of a undivided Hindu family. The assessee is entitled to his costs. Counsel's fee Rs. 250. C. M. P. No. 8322/52. - Since R. C. 29 of 1952 has been disposed of today in favour of the assessee, counsel for the petitioner represents that no further question need be referred at this stage. C. M. P. 8322 of 1952 is dismissed. No costs. Reference answered accordingly.