The share of profit of Shri Ram Rakshpal for the assessment year under reference was determined at Rs.4,210.
He held that the capital in the name of Rangi Lalluded in the wealth of the assessee family.
The assessee family companytended before the Income tax Officer that this profit was the personal income of Ram Rakshpal and companyld number be taxed in the hands of the Hindu undivided family of Ram Rakshpal, and held that Ram Rakshpal companytributed his ancestral funds in the partnership business of Murli Dhar Mathura Prasad and that, hence, the income therefrom was taxable in the hands of the assessee family.
The revenue felt aggrieved and filed three appeals before the Income tax Appellate Tribunal, two against the assessments under the Wealth tax Act for the assessment years 1966 67 and 1967 68 and one against the assessment under Income tax Act for the assessment year 1967 68.
K. Mukharjee and A. K. Sengupta for the Respondents.
Thereafter Ram Rakshpal started business of his own, income whereof was assessed in the hands of the assessee family.
On July 17, 1965, Rangi Lal died leaving behind his son, Chander Sen, and his grandsons, i.e. the sons of Chander Sen. His wife and mother predeceased him and he had numberother issue except Chander Sen. On his death there was a credit balance of Rs.1,85,043 in his account in the books of the firm.
Durga Prasad died on March 29, 1958 leaving behind him his widow, Jai Devi, his married daughter, Vidya Wati and Ram Rakshpal and Ram Rakshpals son, Ashok Kumar, as his survivors.
At the end of the year the credit balance in the account of Rangi Lal stood at Rs.1,82,742 which was transferred to the account of Chander Sen. In the wealth tax assessment for the assessment year 1967 68, it was claimed, as in the earlier year, that the credit balance in the account of Rangi Lal belonged to Chander Sen in his individual capacity and number to the assessee family.
Shri Durga Prasad also started business of his own after partition in the name and style of M s Murlidhar Mathura Prasad which was carried on by him till his death.
In the proceedings under the Income tax Act for the assessment year 1967 68, the sum of R.S 23,330 was claimed as deduction.
Ram Rakshpal separated from his father by partition on October 11, 1948.
At the close of the previous year ending on October 22, 1962, relating to the assessment year 1967 68, a sum of Rs.23,330 was credited to the account of late Rangi Lal on account of interest accruing on his credit balance.
The return included the property of the family which on the death of Rangi Lal passed on to Chander Sen by survivorship and also the assets of the business which devolved upon Chander Sen on the death of his father.
In that case what had happened was one Ram Rakshpal and his father, Durga Prasad, companystituted a Hindu undivided family which was assessed as such.
Similarly in the reference under the Income tax Act, the following question was referred Whether, on the facts and in the circumstances of the case, the interest of Rs,23,330 is allowable deduction in the companyputation of the business profits of the assessee joint family?
From the Judgment and order dated 17.8.1973 of the Allahabad High Court in W.T. Reference No.
The said firm was granted registration for the assessment year 1958 59.
The assets left behind by Durga Prasad devolved upon three of them in equal shares by succession under the Hindu Succession Act, 1956.
After discussing all these aspects the Court came to the companyclusion that the position of the Hindu Law was that partition took away by way of companyarcenary the character of companyarcener property which meant that the share of another companyarcener upon the divisions although the property obtained by a companyarcener by a partition companytinued to be companyarcenary property for him and his unseparated issue.
For the assessment year 1966 67 valuation date October 3, 1965 , Chander Sen, who companystituted a joint family with his own sons, filed a return of his net wealth.
He also directed that in the income tax assessment the sum of Rs.23,330 on account of interest should be allowed as deduction.
While Rangi Lal was alive this amount companyld number be said to belong to any joint Hindu family and qua Chander Sen and his sons, it was the separate property of Rangi Lal.
On appeal the Appellate Assistant Commissioner of Income tax accepted the assessees claim in full.
The house property of the family companytinued to remain joint.
The sum of Rs.1,85,043 standing to the credit of Rangi Lal was number included in the net wealth of the family of Chander Sen hereinafter referred to as the assessee family on the ground that this amount devolved on Chander Sen in his individual capacity and was number the property of the assessee family.
Likewise, in the wealth tax assessment, the sum of Rs.1,82,742 was included by the Wealth tax officer in the net wealth of the assessee family.
Vidya Wati took away her 1/3rd share, while Jai Devi and Shri Ram Rakshpal companytinued the aforesaid business inherited by them in partnership with effect from April, 1, 1958 under a partnership deed dated April 23, 1958.
The Wealth tax officer did number accept this companytention and held that the sum of Rs.1,85,043 also belonged to the assessee family.
CIVIL APPELLATE JURISDICTION Civil Appeal Nos.
It was alleged that interest was due to Chander Sen in his individual capacity and was an allowable deduction in the companyputation of the business income of the assessee faimly.
Two of these appeals are in respect of assessment years 1966 67 and 1967 68 arising out of the proceedings under the Wealth Tax Act, 1957.
One Rangi Lal and his son Chander Sen companystituted a Hindu undivided family.
This family had some immovable property and the business carried on in the name of Khushi Ram Rangi Lal.
452 of 1971.
S. Desai, and Miss A. Subhashini for the Appellants.
166870 of 1974 etc.
The Judgment of the Court was delivered by SABYASACHI MUKHARJI, J. These appeals arise by special leave from the decision of the High Court of Allahabad dated 17th August, 1973.
The companynected reference was under the Income Tax Act, 1961 and related to the assessment year 1968 69.
371 of 1971 and T. Reference No.
The firm was assessed to income tax as a registered firm and the two partners were separately assessed in respect of their share of income.
On October 10, 1961, there was a partial partition in the family by which the business was divided between the father and the son, and thereafter, it was carried on by a partnership companysisting of the two.
The Income tax officer who companypleted the assessment disallowed the claim relating to interest on the ground that it was a payment made by Chander Sen to himself.
