COMMISSIONER OF INCOME TAX Vs. BILAS RAI TEKRIWAL

JUDGEMENT

(1.) BOTH these cases are references under Section 66(1) of the Income-tax Act and a question of law common for the assessment years 1955-56 and 56-57 has been referred for the opinion of the High Court, which is in these terms:

(2.) ON the facts found, it appears that up to the 5th November, 1953, Shri Bilas Rai, the assessee, was constituting a Hindu undivided family with himself as Karta, and his wife, Shrimati Sheo Bayee, his major son, Mantu Ram Tekriwal, and three minor sons, Kedarnath, Daulat Ram and Santosh Kumar, as members thereof. This undivided family was carrying on business in the name and style of Manoharlal Bilas Rao. ON the 5th November, 1953, however, there was a partial partition in the family as regards the business assets only; the immovable properties remaining joint. A partition deed was executed on the same date and the business capital of the erstwhile Hindu undivided family totalling Rs. 1,33,463-1-0 was divided into six equal parts. ON the very same day, the family business was converted into a partnership and a deed of partnership was executed between the assessee Bilas Rai, his wife and his major son, Manturam Tekriwal. The three minor sons were, on the same day, admitted to the benefits of the partnership; it being settled and decided between the major members of the partnership that the firm constituted under the deed of partnership will succeed to all the assets and liabilities of the Hindu undivided family business. The result was that the sum of money, namely, Rs. 22,243-13-6 which had fallen to the share of the wife and a like amount which had fallen to the share of each of the minor sons went to constitute the capital of the firm at its very inception and for purposes of accounts it stood credited in the accounts of the firm's books to the credit of the wife and the minor sons, respectively.