RIJHUMAL VALIRAM Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ORIGINALLY there were two references, one concerning Rijhumal Valiram and the other concerning Hiranand Valiram. Each of the two references concerned the income -tax asst. yrs. 1948 -49 to 1951 -52. Facts and rival contentions concerning each of the four years in the matter of both the references were identical or at least closely similar and the two references were, therefore, ordered to be consolidated. Rijhumal and Hiranand were partners in certain three mill partnerships, in each of which partnerships each of them had a four annas share. Both of them were also partners in a fourth partnership, the same being M/s Valiram Sons, in which there were thirteen partners, Rijhumal and Hiranand each having a four annas share therein. The main question which has arisen is whether the share of profits received by each of them from the three mill partnerships was liable to be included in their individual assessments or was, as contended by them, held by them only as representing the firm of M/s Valiram Sons.

(2.) DURING the relevant assessment years the firm of M/s Valiram Sons was constituted on the terms and conditions contained in the deed of partnership dated the 10th April, 1946. The partnership commenced from the 10th of April, 1946. The deed shows that there were, besides Rijhumal and Hiranand, eleven other partners, that Rijhumal had a four annas share, that Hiranand had a four annas share and that the individual shares of the other eleven partners aggregated to the remaining eight annas in a rupee, both in profits and losses. The document clearly shows that the capital was to be provided by Rijhumal and Hiranand as the financing partners and that the eleven other partners were mere working partners who had no obligation to bring in any capital into the partnership. The deed further shows that the property of the business, including goodwill, etc., was to wholly belong to the two financing partners.

(3.) RIJHUMAL and Hiranand made a joint declaration in the form of an affidavit dated the 19th August, 1947. The declaration concerned several properties all of which are not relevant to the present reference, but by paragraph 5 thereof it was declared by them that they had entered into partnership with the said Laxmichand Durlabhji and Manilal Durlabhji under the name and style of New Prabhat Silk Mills and had been carrying on the business of the said partnership upon the terms and conditions contained in the said deed of partnership dated 25th April, 1947, and that they had in the said partnership an eight annas share in the profits which they, by the said declaration, declared were holding for the benefit of themselves and the other partners in the firm of M/s Valiram Sons and that they and their other partners in M/s Valiram Sons had interest in the said eight annas share in the proportion of their respective shares in the said partnership of M/s Valiram Sons.