COMMISSIONER OF INCOME-TAX Vs. WALIUR RAHMAN

JUDGEMENT

(1.) This is an application by the Commissioner of Income-tax, Bengal, for an order calling upon the Income-tax Appellate Tribunal to state a case on questions of law with respect to its order relating to an assessment for the year 1938-1939 made upon Khan Bahadur Waliur Rahman of Jalpaiguri. On 17-1-1944 this Court issued a rule nisi calling upon the Tribunal to show cause why a case should not be stated and this is the hearing of the rule which was served not only on the Tribunal but also on the assessee. Since the issue of this application the assessee had died and his sons and daughters have been brought on the record as his legal representatives. No point arises out of this.

(2.) It is convenient first to state the relevant facts. The assessee and his wife Begum Manija Khatun, are each possessed of separate properties, the wife's property was in no way derived from her husband and she obtained it from other sources. Each of them is the proprietor of lands, portions of which are adjacent to each other. Having obtained the necessary permits from the Government, the assessee and his wife commenced to grow tea upon lands belonging to each of them adjacent to one another's property. In order to put the crop into a marketable state, a tea factory was purchased and other arrangements were made to make and sell tea, the husband and the wife each finding a sum for those purposes. After manufacture the tea is sold and the proceeds, or more correctly, the profits of the proceeds, are equally divided between the assessee and his wife. With regard to the management of the wife's interest in the growing of the crop, its manufacture and sale, the husband holds, together with 8 other persons, a power of attorney from the wife enabling him and the others to deal with matters which require attention with respect to those arrangements. It is no part of the applicant's case that the separate pieces of adjacent land belonging to the husband and the wife ever ceased to be other than their respective separate properties.

(3.) The undertaking, as I will call it, with regard to the manufacture and sale of tea is known as the Rheabari Tea Estate and, so far as it is material, up to the year of assessment 1938- 1939, the profits from that undertaking were assessed as upon an association of individuals. In respect of the year under consideration the Income-tax Officer considered that the husband and the wife were partners together in the Rheabari Tea Estate. Consequently, he applied the provisions of Section 16(3)(a)(i), Income-tax Act, which reads as follows: In computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of a wife as arises directly or indirectly from the membership of the wife in a firm of which her husband is a partner. The Rheabari Tea Estate was treated as a partnership and the result of the new method of assessment was to include in the husband's income-tax assessment that part of the profits from the Rheabari Tea Estate as were considered to belong to the wife, and for the purpose of assessment that income was treated as part of the husband's income.