GOPINATH SETH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) For the assessment year 1969-70, the Tribunal has submitted the statement of case and has referred the following question of law for our opinion :

(2.) The Tribunal has held that out of the total income of Rs. 52,687, the share income from the partnership firm was about Rs. 48,000, the balance being interest on loans. The assessee-family had no independent business. The karta of the assessee-family, namely, Gopinath, was a partner on behalf of the family, namely, in the various businesses in which it had shares and as such was supposed to look after the family's interest in his capacity as a partner of the firm. No specific services were required to be done by him other than the normal functions of a partner. All the firms, except one, were situate in Kanpur. The loans advanced were also to all concerns in Kanpur itself. It was not, therefore, as if the karta had to frequently visit out-station places to look after the business interest of the family. On this view, the Tribunal held that it was not satisfied that the agreement in question was dictated by commercial expediency. The Tribunal also held that the agreement was not valid because it was not on behalf of the members of the family. Minor children were also members of the family but the agreement did not purport to be on their behalf.

(3.) Learned counsel for the assessee has assailed both the findings. The family income was mainly from investments or loans. Some of the funds were invested in various firms. From them they derived income. Rest were advanced by way of loans on which interest was earned. The assessee has not put forward the case that the karta had to render any specific services in order to earn the income for the family. There is not even a whisper in the judgment of any of the three authorities below that the assessee submitted that the karta was required to carry on business activities in any of the firms in which he was a partner representing the family or that he had to do any specific services in connection with the business of those partnership firms. So far as the investments by way of loans are concerned, it is obvious that nothing much has to be done except to see that the interests are paid and the loans are repaid as and when the debt becomes due. It is on this basis that the Tribunal emphasised that no specific services were done by the karta on behalf of the assessee-family in the various businesses and his normal function was not in every case to manage the affairs of those firms. That is confined to the work of the managing partners of those firms. However, a sleeping partner is not normally required to participate in the actual carrying on of the business of the firm. It is in this sense the Tribunal laid emphasis on the fact that, nearly all the firms are situated at Kanpur itself, We are not satisfied that in the present case, the karta was required to do any specific work or job in connection with the business of the partnerships in which the family has shares except, of course, to see that he receives the share income from the various partnership firms. From this point of view, we are not satisfied that the finding that the agreement is not dictated by any commercial expediency suffers from any error of law.