COMMISSIONER OF INCOME TAX Vs. MOTILAL BANKERS

JUDGEMENT

(1.) A Hindu undivided family, of which Motilal was the karta, carried on several businesses. One of the businesses consisted of money-lending and it was carried on under the name and style of Motilal Bankers. During the previous year relevant to the assessment year 1961-62, with which we are concerned, the karta, Motilal, entered into partnership with Narendra Kumar, an undivided junior member of the family. Narendra Kumar brought in a sum of Rs. 5,000 to the business and became an eight anna partner in it.

(2.) FOR the assessment year 1961-62, the partnership firm applied for registration under the Indian Income-tax Act and thereafter declarations were filed for the assessment years 1962-63 and 1963-64 in accordance with Section 184(7) of the Act. The Income-tax Officer declined to register the firm for these three years, holding that it had not been proved that Narendra Kumar had brought in the capital alleged, and, further, that an undivided junior member could not become a partner with the karta of the family. He included the income in the hands of the Hindu undivided family. The firm as well as the family appealed to the Appellate Assistant Commissioner, and he held that introduction of the capital by Narendra Kumar had been satisfactorily proved and that it was open in law to an undivided junior member of the Hindu undivided lamily to enter into a partnership with the karta of the family. In the result, he directed registration of the firm and excluded the income from the Hindu undivided family assessment. The Income-tax Officer appealed to the Income-tax Appellate Tribunal, but the Tribunal affirmed the decision of the Appellate Assistant Commissioner.

(3.) IT seems to us fairly plain that the view taken by the Tribunal is right in law. Motilal, the karta of the Hindu undivided family, entered into partnership with Narendra Kumar, an undivided member of the family, who brought into the partnership his separate property. When Narendra Kumar entered into partnership with Motilal, karta of the family, he brought into the partnership a sum of money as his capital, and admittedly that money represented his separate property. Narendra Kumar was entitled to enjoy the benefit of that separate property. He could invest it as capital in a partnership entered into with a stranger. He could do so also in a partnership entered into with the karta of his Hindu undivided family. In the latter event, the use of separate property was a thing apart from his interest in the family property. As long ago as Lachhman Das v. Commissioner of Income-tax, [1948] 16 I.T.R. 35. 40 (P.C.) the Privy Council laid down that there could in law be a partnership between the karta of a Hindu undivided family as representing the family and a member of the family in his individual capacity who brought in separate property. IT was observed.