SULAKHE T G Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Tribunal, Bombay Bench " B ", has referred four questions, two arising from the order of Sri Aggarwal and two from that of the Accountant Member, Sri Malhotra. In order to appreciate the questions framed as arising from the orders of each of the members and referred by the Tribunal to the High Court under S. 66(1) of the Indian IT Act (hereinafter called the Act) a few facts are necessary.

(2.) A Hindu joint family consisted of T.G. Sulakhe, K.G. Sulakhe and B. G. Sulakhe. All the three brothers were being assessed under that status for 1950-51, for which period the accounting year ended on 21st Sept., 1949. This family, besides owning immovable properties, carried on the following businesses : (a) General Stone Supplying Co., (b) contract work of the Godavary Project, (c) a ready-made clothes business in the name of Mahendra Bros., Poona, in which one Khelikar is the working partner, and (d) a 1/3rd share in the profits and losses of the Hyderabad Sand Syndicate, Kachuguda. In the course of the assessment proceedings for 1950-51, the members of the family claimed that there was a division in status between them and that the joint family properties were divided among the three members of the family on 22nd Oct., 1949. In support of this assertion a deed of partition engrossed on a one-rupee stamp paper dt. 22nd Oct., 1949, was produced before the ITO, who accepted the division in status and the partition and passed an order under S. 25A to the effect that there was a separation in the family on 22nd Oct., 1949. The businesses of the family were divided as follows : (a) the profits and losses of the Poona business ever since its inception and the share of the HUF in the Hyderabad Sand Syndicate was to belong to K. G. Sulakhe, and (b) the capital of the previous HUF invested in the other two businesses, viz., the General Stone Supplying Co., and the Godavary Project contract, were divided among the three brothers in equal shares and credited to their personal accounts in the businesses. It was also claimed that after such partition, the three brothers carried on the businesses in partnership under a deed of partnership of the same date as the partition deed. The ITO on an application being made by the assessee firm and having regard to the recognition by him of the division in status and partition in the family on 22nd Oct., 1949, by his order dt. 31st March, 1952, recognised the partnership with effect from. that date and registered the firm under S. 26A of the Act. As we have already stated, as the accounting year for the assessment of 1950-51 ended on 21st Sept., 1949, the separation in status and partition of the joint family did not affect the assessment for that year which was made on the basis of the assessee being an HUF. This was also the view which the Tribunal expressed, namely, that the effect of the CIT's order for the year 1950-51 is practically nil. It is only with respect to the asst. yrs. 1951-52 and 1952-53 that the three brothers claimed to have formed themselves into a partnership each holding an equal share therein from 22nd Oct., 1949.

(3.) THE Tribunal has now under S. 66(1) of the Act referred two questions arising on the order of the Judicial Member and two questions arising out of the order of the Accountant Member. It would have been, in our view, more appropriate for both the members to have sent us agreed questions for a better appreciation of the actual points involved in the reference for determination. THE following are the four questions the first two formulated by the Judicial Member and the other two by the Accountant Member :