NANDLAL AGARWAL Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) BY an order of this court, a statement of the case was called for from the Income -tax Appellate Tribunal, Calcutta Bench, and the Tribunal was directed to refer the following question of law for opinion to this court :

(2.) THE assessment year is 1954 -55 and the accounting year is 1953 -54. One Kishanlal Agarwal was assessed as an individual in respect of the income arising from the business carried on in the name of Shri. Krishna Rice Mills. Kishanlal died in the year 1950 leaving his widow and his two minor sons - Basant and Ashok. In the year 1952, his widow died, and, after her death, the family consisted of her two sons - Basant and Ashok - who were minors. An application was, therefore, made before the Subordinate Judge, Nowgong, praying that a guardian be appointed of the minors person and property and an interim appointment was made by the court by its order dated the 1st June, 1953, appointing one Nandlal Agarwal as the guardian of both the minors. Thereafter, this order was affirmed on the 15th December, 1953, with the modification that both Nandlal Agarwal and Dwarka Prosad Agarwal were appointed as guardians of the person and property of the two minors. They were directed to render accounts half -yearly to the court. On the 25th March, 1958, the guardians applied to the court asking for permission to show the accounts of the two minors separately. The court ordered the guardians to keep and submit separate accounts for each of the minors together with the accounts of profit and loss and separate expenditure of each minor. For the appreciation of facts it will be necessary to note the status in which the father of the minors was previously assessed. For the assessment year 1951 -52, the profit of the mill was returned in the status of an individual. For the assessment year 1952 -53 the return was filed after the death of the widow by Nandlal Agarwal as the guardian of the minors describing the status as an individual. For the next year 1953 -54, the status was described as Hindu undivided family. The assessments for the years 1951 -52 and 1952 -53 were made on the basis of the declared status and were accepted without an appeal being filed. For the year 1953 -54, the assessment was made by the Income -tax Officer in the status of an "association of persons". Return was filed for the year 1954 -55 giving out the status as Hindu undivided family by the two guardians. The Income -tax Officer assessed the two guardians, Nandlal Agarwal and Dwarka Prosad Agarwal, under section 23(3) read with section 41 of the Indian Income -tax Act as an "association of persons" on a total income of Rs. 32,593. On appeal, the Appellate Assistant Commissioner took the view that the case was covered by sections 40 and 41 of the Income -tax Act since the shares of the two minors were definite and ascertainable. He, therefore, set aside the order of the Income -tax Officer and directed him to start proceedings for each of the two minors separately. The department went up in appeal to the Appellate Tribunal. The Appellate Tribunal reversed the decision of the Appellate Assistant Commissioner. The Tribunal came to the following finding : Firstly, that up to the time of his death in 1950 Kishanlal Agarwal was assessed as an individual. There was no joint family in existence at that time and thus the two minor sons acquired no right in the property of Kishanlal by virtue of birth. After the death of Kishanlal, the joint family consisted of the widow and the two minor sons. After the death of the widow, the shares of the minors were enlarged and they continued to be the members of the joint family. The Tribunal was of the opinion that the guardians were to be assessed in the same manner as beneficiaries and as the beneficiaries could have been assessed as Hindu undivided family on the income from the business, the guardians were liable to be assessed as Hindu undivided family. On that basis, the appeal was allowed and the order of the Income -tax Officer was modified only to the extent that the status in which the assessment was to be made was that of a Hindu undivided family instead of an "association of persons". On these facts, the present question has been referred to us for opinion.

(3.) MR . Choudhary referred to cases of Vedathanni v. Commissioner of Income -tax, Commissioner of Income -tax v. Gomedalli Lakshminarayan, Commissioner of Income -tax v. Lakshmanan Chettiar, Commissioner of Income -tax v. Dhannalal Devilal, in support of his contention that a joint family may consist of a single male member. It is not necessary to deal with these cases at length as they do not decide the point for consideration before us.