KALYANJI VITHALDAS Vs. COMMISSIONER OF INCOME TAX, BENGAL

JUDGEMENT

(1.) These six appeals concern the assessment to super-tax for the year 1931-32 of six of the seven partners of a firm known at Moolji Sicka and Co. This firm was for the year in question registered under S. 26-A, Income-tax Act, the instrument of partnership being a Gujrati deed dated 11 September 1930. Its business was that of dealers in Indian tobacco and cigarettes. The assessment to income-tax of the registered firm has been made in due course, and the present controversy is whether six of the partners should each be assessed to super-tax upon his share of the profits as an individual, or whether these six shares should each be assessed as income of a Hindu undivided family. The rates of super-tax imposed by the relevant Finance Act are less in the case of a Hindu undivided family than in the case of an individual. The problem has to be answered by applying to the facts of each case the language of S. 55 of the Act: In addition to the income-tax charged for any year, there shall be charged, levied and paid for that year in respect of the total income of the previous year of any individual, Hindu undivided family, company, unregistered firm or other association of individuals, not being a registered firm, an additional duty of income-tax (in this Act referred to as super-tax) at the rate or rates laid down for that year by Act of the Indian Legislature: Provided that, where the profits and gains of an unregistered firm have been assessed to super- tax, super-tax shall not be payable by an individual having a share in the firm in respect of the amount of such profits and gains which is proportionate to his share.

(2.) The two questions finally referred in each case by the Commissioner for the opinion of the High Court at Calcutta are as follows: (1) Whether the family of the assesses, as it now stands, is a Hindu undivided family within the meaning of the Income-tax Act ? (2) If the first question be answered in the affirmative, whether in the circumstances recorded in this case the income in question should be treated as income of that family and assessed as such ? The High Court (Lort-Williams and Jack, JJ.) have in each case answered the first question in the negative and held that the second question did not arise. The parties are governed by the Mitakshara and their pedigrees and families may be exhibited as under: The history of the firm according to the Commissioner is that in or about 1912 the business was begun by Moolji and Purshottam (brothers who had separated) and Kalyanji (who is not related to either), and that in no case were ancestral funds employed for the purpose. That in 1919 Moolji made gifts of capital to each of his sons by his first wife, viz., Kanji and Sewdas. That at least since 1919 Moolji, Kanji and Sewdas have been separate from each other. That in 1919 on the terms of a Gujrati deed dated 1 May, Kanji (son of Moolji) and Chaturbhuj (brother of Kalyanji) were taken into the partnership. That in 1930 Sewdas and Kalyanji's brother Champsi were taken into the firm on the terms of the deed of 11 September 1930 already mentioned. That the interest of Kanji and of Sewdas was a gift from their father Moolji, and that of Chaturbhuj a gift from his brother Kalyanji. That in no case has it been proved that the individual partner has thrown his interest in the firm or his receipts therefrom into the common stock, i. e., treated it as joint family property. Their Lordships are of opinion that the High Court was right in proceeding upon these findings of fact by the Commissioner.

(3.) From these facts it clearly appears, so far as Moolji, Purshottam and Kalyanji are concerned, that they are each members of a Hindu undivided family. Each has a son or sons from whom, so far as the evidence goes, he is not divided. But the income from the firm is clearly the separate and self-acquired property of the partner, and as it has not been thrown into the common stock, it cannot be regarded as income of the family. It is the income of an individual and assessable to super-tax as such under S. 55 of the Act. In these three cases, therefore, the High Court should have answered the first question in the affirmative and the second question in the negative. The interest of Chaturbhuj in the firm was obtained from his brother Kalyanji. It is self-acquired and not ancestral property ; Chaturbhuj has no son, but even if he had, the son would have taken by birth no interest in the income now in question. The High Court might well have answered the second question in the negative and said of the first question that it did not arise. In none of the four cases abovemeotioned, -viz., those of Moolji, Purshottam, Kalyanji and Chaturbhuj-does the fact that the man has a wife and daughter (or more than one) affect the result. The existence of a son does not make his father's self- acquired property family property or joint property. That the existence of a wife or daughter does so is untenable.