Bombay High Court
The Commissioner Of Income-Tax vs Jesingbhai Ugarchand on 27 September, 1937
Equivalent citations: (1938)40BOMLR452, AIR 1938 BOMBAY 350
JUDGMENT John Beaumont, Kt., C.J.
1. This is a reference by the Income-tax Commissioner arising in these circumstances. The assessees were a Hindu undivided family consisting of a father and seven sons, and on the finding of the Commissioner they separated during the year of assessment. Shortly after the separation of the family the father and his seven sons, that is to say, exactly the same persons as constituted the joint family, formed themselves into a firm, and asked the Income-tax Officer to register it. The question which the Commissioner of Income-tax propounds is :
Whether in a case where it is found as a fact, and an order is recorded under Section 25A(1) of the Indian Income-tax Act, that a Hindu family hitherto assessed as undivided, has separated and the joint family property has been partitioned among the various members in definite portions, it is incumbent on the Income-tax Officer to entertain an application made under Section 26A to register a firm, said to consist of all the members of the family so separated, and if satisfied as to the existence of such a firm, to make the assessment thereon under the provisions of Section 26(2) or whether it is incumbent on him to make an assessment of the total income received by the joint family as such and hold each member liable for his proportionate share of the tax so assessed under the provisions of Section 25A(2).
2. In substance what it really comes to is that if the members of the separated joint family are assessed under Section 25A(2) they have to pay the whole tax which would have been assessed on the joint family in the proportions in which they are interested in the joint family property, and they cannot claim any deduction in respect of the lower rate of tax to which they might as individuals have been entitled, as they can do in the case of a registered firm under Section 48(2) of the Indian Income-tax Act. Now this case is absolutely on all fours with a case which came before a full bench of the Madras High Court, Chinna Pullayya v. The Commissioner of Income-tax, Madras (1936) 9 I.T.C. 377, f. b. and the Court there held that as the firm consisted of exactly the same individuals as the previous joint Hindu family, there had been no succession within the meaning of Section 26(2), and that the assessment must be made under Section 25A(2). It is clearly not desirable that conflicting decisions under the Act which applies to the whole of British India should be given by different High Courts on exactly similar facts, and we propose, therefore, to follow the Madras case without expressing any opinion of our own. The second part of the question, therefore, will be answered in the affirmative, and the first part in the negative. Assessees to pay the costs of the Commissioner on the Original Side scale to be taxed by the Taxing Master, less the deposit of Rs. 100.
Blackwell, J.
3. I agree.