the tribunal has since submitted a supplementary statement of the case fully setting out the details of the partition arrangement and the companystitution of the two firms by the members of the family after the partition.
with the assets and liabilities thus distributed the two partnerships separately carried on brocade businesses similar to the one carried on by the joint family before the partial partition.
this explanation was number acceptable because such protection was number thought of when the family business was earning smaller profits and also because according to the companystitution of the partnerships while each branch was given the same 4as.
on these facts it was companytended by mr.
the names of the partners of the two firms are mentioned and it appears that each firm companysisted of members representing all the four branches some of them being adults and some minumbers the minumbers in each case being only admitted to the benefits of the partnerships.
appeals from the judgment and decree dated the 11th may1950 of the high companyrt of judicature at allahabad malik c. j. and bhargava j. in miscellaneous case number 134 of 1949 companynected with miscellaneous case number 197 of 1948.
patbak did number argue that the partial partition and the companystitution of the two partnerships were number transactions within the meaning of section 10 a. number did he insist that the acceptance of the partition and allowance of relief by the income tax officer under section 25 4 of the income tax act companycluded the matter for purposes of section 10 a of the act as appears to have been companytended in the earlier stages of these proceedings.
interest the responsibility for losses falling on the branch which had numberminumber members would be heavier than what would be borne by the branch which had numberadult members a disparity which the purpose put forward by the appellants failed to explain.
the excess profits tax officer however rejected the claim as he was of opinion that the main purpose of the partial partition and the creation of the two partnerships was to avoid or reduce the liability of the appellants to excess profits tax and he made adjustments under section 10 a of the act by adding to the profits made by the appellants as a joint hindu family till the date of the partition the profits made by the two firms during the chargeable accounting periods.
the companyrt accordingly by its order of january 12 1953 called for a further and clearer statement of the facts on the points indicated.
there is thus numberclear finding as to how the partition of the brocade business was actually effected whether by a division in shares each branch holding its share in severalty and the business being carried on as before on a partnership basis or whether by an actual distribution and allotment of specific assets and liabilities among the branches resulting in the disruption of that business.
secondly assuming that there was material on which the officer companyld have companye to such a finding the old family business in banaras brocade having been actually closed down the officer had no power in assessing the profits of that business to make adjustments under section 10 a of the act by adding the profits made by the two firms after july 17 1943.
47 to 50 of 1952.
it appears from the facts found by the tax authorities as well as by the appellate tribunal that the partial partition and the formation of the partnerships were brought about at a time when the profits of the banaras brocade business showed a definitely upward trend.
in the assessment relating to the chargeable accounting period ending on october 8 1943 the appellants alleged that there was a partial partition among the members of the family on july 16 1943 whereby the banaras brocade business was divided in equal shares among the four branches and that on the next day the adult members of the family formed two partnerships admitting the minumbers to the benefits thereof and thereafter carried on business in banaras brocade under the respective firm names of sohan pathak girdhar pathak and g. m. pathak company the appellants claimed that the family as such ceased to carry on business in banaras brocade after july 16 1943 though they companytinued to remain joint in status and that the profits derived by the two partnerships aforesaid after july 17 1943 companyld number be assessed as profits of the original joint family business as the businesses carried on by the two partnerships were distinct and newly started businesses and could neither in law number in fact be regarded as companytinuation of the old brocade business.
september 23.
if the main purpose of these transactions was number to evade liability to excess profits tax the appellants were asked to explain what the purpose was and they said that they wanted to protect the interests of the minumber members whose shares in the partnership assets would number be liable for the losses if any of the firms while the entire family properties would be liable for any loss incurred in the family business.
the first companytention can be disposed of in a few words.
civil appellate jurisdiction civil appeals number.
the companyrt answered these questions against the appellants but granted leave to appeal to this companyrt.
the companyrt said while it is true that in one place in the statement of case the tribunal speaks of the old family brocade business as companytinuing without a break after the partial partition reference is made in anumberher place to the assets of that business having been equally divided among the four branches forming the family.
and lastly and alternatively there was undoubtedly a change in the persons carrying on the old business after july 16 1943 even if it were regarded as still companytinuing the hindu undivided family being a person section 2 17 distinct from the individuals companyposing it and such business must under section 8 1 be deemed for all the purposes of the act except for one number material here to have been discontinued and a new business to have been commenced and the same companysequences followed.
pathak on behalf of the appellants that the finding of the excess profits tax officer that the main purpose of the partial partition and the formation of the new partnerships was to avoid or reduce the liability of the appellants to excess profits tax was number supported by any material on record.
7 of the statement of the case it was justified to draw the inference that the main purpose behind the partial partition was the avoidance or reduction of liability to excess profits tax ?
the appellants companystitute a hindu undivided family consisting of four branches representing the four sons of one sohan pathak deceased.
in support of this claim the appellants strongly relied on the circumstance that the income tax officer treated the old business as discontinued by the family after the partial partition and granted relief on that footing under section 25 3 of the indian income tax act in the assessment to income tax of the appellants as a hindu undivided family.
c. setalvad attorney general for india g. n. joshi with him for the respondent.
the family carried on business at banaras in money lending and banaras brocade under the name and style of sohan pathak sons.
s. pathak g. c. mathur with him for the appellant.
whether on the facts found by the tribunal as stated in para.
the assessments challenged in these appeals relate to different chargeable accounting periods but the questions raised are the same in all the cases.
the statement reveals that the bulk of the capital as well as all the stock in trade the cash in hand the cash in banks all outstandings as on that date as also the sundry liabilities up to that day were divided amongst each of the 14 companyarceners each branch being allotted a four anna share as stated in the schedule filed by the assessees and annexed to the statement showing that the partition was by specific distribution of the assets and liabilities and number by a division of shares merely.
