COMMISSIONER OF INCOME-TAX Vs. KIKABHAI

JUDGEMENT

(1.) UNDER Section 66(1), Income-tax Act, the Commissioner of Income-tax has submitted the following point of law for decision: Whether the three Shia Bohra brothers of Raipur, i.e., Kikabhai, Ibrahimji and Taherbhai, who have inherited the property and business of their father Abdulali, who are living, messing and carrying on business jointly, who keep no accounts of the income made during the years, who keep no separate ledgers in their books of accounts for themselves, who have no intention to do so in future and who have no intention to divide their profits, could be declared "a registerd firm" under Section 2(14), Income-tax Act.

(2.) THE three brothers do business under the name of A. Ahmadjibhai. They live together with their mother and each month Rs. 530 is withdrawn from the shop, of which each of the brothers takes Rs. 50, for personal expenses and the mother Rs. 80 for her personal expenses and Rs. 300, for household expenses. The rest of the profits are left in the business. It seems to us that the three brothers can be held to constitute a firm within the meaning of Section 239, Contract Act, because they do intend eventually to share among them the profits of the shop. The definition of "partnership" in that section does not require the profits to be shared a any particular time. Partners can leave their profits in the business, and the real test is whether each could withdraw his share, if be so desired. In the present case, it would appear that the arrangement between the brothers is such that one of them could not withdraw only his share of the profits; but each could withdraw from the business and demand his share of the assets including the accumulated profits.

(3.) IN the present case we are satisfied that the certificate was given in good faith. There is no doubt as to the facts. The bothers have each got a one-third share in the shop that they own and that is not denied. They intend to divide the assets whenever it may be necessary or convenient for them to do so and on the division being made, each with necessarily get a share of the profits made during each and every year that they carried on business in partnership. We consider that the three brothers carrying on business under the name of A. Ahmadjibhai are entitled to become a registered firm under Section 2(14), Income-tax Act.