COMMISSIONER OF INCOME TAX Vs. RAO AND COMPANY

JUDGEMENT

(1.) THESE are four references under section 256(1) of the Income -tax Act, 1961. The two questions referred to us for our determination are as follows :

(2.) THE assessee is a partnership firm registered under the Income -tax Act for the assessment year 1965 -66 onwards. The assessment years with which we are concerned are the assessment years 1965 -66, 1966 -67,1967 -68 and 1968 -69. We are disposing of these references together because, although the questions have been referred on seven reference applications, the Income -tax Appellate Tribunal has made a consolidated statement of the the case in respect of all these reference applications. Two brothers, Roulu B. Rau (R. B. Rao) and Yeshwant B. Rao (Y. B. Rao) of Panaji, Goa, were living jointly with their respective wives and children. On July 26, 1959, they executed a document called a public deed which was registered. The parties to the said deed were R. B. Rao and his wife of the first part and Y. B. Rao and his wife of the second part. The said public deed recites that the contracting parties are brothers and lived since many years back under a common roof and in domestic economy in joint family system. The deed then sets out the properties and assets belonging to the joint family. These assets include a cinema house functioning at Panjim and a cinema house functioning in Mapuca. The public deed recites, in connection with these cinema houses, that they are owned by the contracting parties, namely, the joint family, the latter of the cinema houses, namely, the one at Mapuca, having been taken on lease by the said joint family. The deed then goes on to recite, inter alia, as follows : 'That the contracting parties wish to continue to live under the joint family system and select the male member senior to all, Roulu, to administer and represent the joint family, in accordance with the existing legislation, and give him all powers required in law to administer freely the joint family and represent it in any public offices or courts, and confer on him all the powers described in sections 36 and 37 of the Civil Procedure Code.'

(3.) THE joint family of M/s. Rao Family Society was dissolved by a deed of dissolution of joint family and division of heritages dated March 13, 1964. Unfortunately, no copy of the said deed of dissolution has been annexed, although the statement of the case states to the contrary. However, from the recitals in the statement of the case, it is clear that the said deed of dissolution was executed by R. B. Rao and his wife and their three sons with their respective wives and Y. B. Rao and his wife and their three sons. The deed of dissolution recites that R. B. Rao and his wife and Y. B. Rao and his wife were living in the joint family system contained in the decree of 1880 and that the joint family was established by a public deed dated July 26, 1959. The deed of dissolution goes on to narrate the various properties of the joint family and then states as follows : 'It is now the desire of the first and second parties to dissolve the joint family, what they do by this deed, and divide the mutual heritage, by mutual consent in the following way.'