SUNDAR SINGH MAJITHIA Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is a statement of a case by the Commissioner of Income-tax, Central and United Provinces, under Section 66(2), Income-tax Act. The reference was made at the instance of Sardar Bahadur Dr. Sir Sundar Singh Majithia, C.I.E. who is the head of an undivided Hindu family consisting of himself and his three sons. The Commissioner states that: The assesses enjoys large income from property, has deposits in banks and shares in companies, does money and grain lending business and is interested in a sugar factory styled as the Saraiya Sugar Factory.

(2.) For several years Sir Sundar Singh was also a member of the Executive Council of the Punjab Government and drew a salary in that capacity. The assessment year with which we are concerned is 1932-33 and the accounting year ended with 30 September 1931. The members of this family are Jats of the Sher Gill tribe in the Amritsar district in the Punjab and they are, as we have already said, an undivided Hindu family. In previous years the assessee submitted returns on the footing that the business of the sugar factory was a joint family concern, but at the assessment to which this case relates it was alleged that the father and the sons had divided this business among themselves, while retaining their status as a joint Hindu family and holding all other properties as properties of the Hindu undivided family. It is said that this partition took place in September 1931 and under it the father received a four anna share and the three sons a three anna share each and their mother received the remaining three anna share for life. On 12 February 1933, these five persons executed an instrument of partnership which is printed at p. 13 and the following pages of our record. On 13 February an application was made to the Income-tax Officer under Section 26-A of the Act for registration of the firm which was said to have come into existence under this deed of partnership and for separate assessment on its basis. On 18 April 1933 the application was allowed and assessment was made accordingly but on 20th September 1933 the Commissioner set aside that assessment and directed that a fresh assessment be made. Accordingly on 16 December 1933 the Income-tax Officer made a fresh assessment treating the assessee as an individual and including the profits from the sugar factory; and the "firm" was not registered under Section 26-A of the Act.

(3.) Two appeals were filed to the Assistant Commissioner, one being against the refusal to register the alleged firm under Section 26-A and the other being against the assessment. The Assistant Commissioner upheld the order of the Income-tax Officer refusing to register the firm, but modified his assessment order by directing that the assessment should be that of a Hindu undivided family and by granting an abatement in respect to super-tax. Thereafter an application for review was preferred to the Commissioner under Section 33 and also an application under Section 66(2) requiring the Commissioner to refer certain questions for the decision of this Court. The Com. missioner rejected the application for review, but has stated a case for our decision. The question referred to is as follows: In all the circumstances of this case, having regard to the personal law governing the assessee and the requirements of the Transfer of Property Act (No. 4 of 1882) and the Stamp Act (2 of 1899), has the deed of partnership (Appendix A) dated 12th February 1933, brought into existence a genuine firm entitled to registration under the provisions of Section 26-A of the Act.