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Judgment
Coutts Trotter, J.—This is a case referred by the Commissioner of Income Tax to the High Court u/s 51 of the Income Tax Act, VII of
1918 read with Section 6 of the Super-tax Act, 1920. The question for decision is whether the asses-sees who are the registered firm of M.
Doraiswami Aiyangar and Brothers are assessable to Super-tax as an undivided Hindu family and the specific questions put to us are as follows:
(1) Does the registration of the brothers as a firm as defined u/s 2(12) of Act VII of 1918 preclude the assessment of the family as an undivided
family to super-tax on the income derived from the business of this firm?
(2) If not, does the mere constitution of a partnership between some members of the family by a formal document preclude the assessment of the
income of the partnership to super-tax as part of the income of the undivided family?
When this case first came before us we thought it necessary to have mere information than was afforded to us by the original case stated and
therefore referred the case back for a finding of fact as to whether the original capital of the firm was wholly or in part derived from joint family
funds. The answer to that is to be found in the Commissioner''s letter dated the 5th August 1922, the concluding paragraph of which runs as
follows:
On the whole no adequate evidence has been adduced which would enable me to record a finding as a fact whether the original capital of the firm
was wholly or in part derived from joint family funds.
To that is appended the following statement:
It can only be inferred from the conduct of the assessees and all the circumstances of the case that appellants intended to trade as a joint family and
did trade as such.
We desire to say with rgard to this last statement that it is in no way relevant to anything that we referred back to the commissioner and that we
decline to treat it as a finding of fact by which we are bound in framing our answer to the questions referred to us. It appears to us to be a
deduction of law from known circumstances rather than a finding of fact; but in any event, we disregard it as being in no way called for in
connection with the matter that has been referred. In any event it is vitiated by the laxity of reasoning which led up to, and is evidenced by the
language in paragraph (3) of the same document in which it is said that the four brothers ""practically"" form the joint family. A joint family consists of
certain definite persons and any given individual must either be a member of it or not. The general legal position appears to us to be beyond doubt.
Members of a joint family may engage in trade in such a way as to ""embark on the adventure funds of the joint family and pledgees credit to their
undertaking. On the other hand members of a joint family may embark on a trade without involving the funds of the joint family in it; and, in that
event, their profits as traders would be self-acquisitions and the losses would not be recoverable from the joint family property. The members who
actually take part in the trade may enter into a deed of partnership between themselves or between themselves and a stranger partner which of
course, would regulate their dealing inter se and with the stranger partner but need not necessarily affect the question as to whether and how far the
property of the joint family is to be regarded as involved in the adventure. It is not conclusive to show that some funds of the joint family were
invested in the trade; because they might have been borrowed by the trading members as a loan of a definite sum to be repaid by the trading firm
just as if it was as loan from strangers. In the present case the accounts appear to show that such a course has been pursued here and that the
amounts advanced by Mr. Anantachariar, the father of the assessees and apparently the manager of the joint family of which they are all admittedly
members, were treated as a mere loan for the purpose of the business to be repaid with interest in the ordinary way and not as an indication that
the business was conducted as a joint family business. But that is a question of fact and inference which is primarily at least for the determination of
the Commissioner and not of this Court. We therefore answer the questions put to us in the only way we can answer them on the materials before
us.
(1) Yes, unless the firm so registered has been shown to carry on its business on behalf of, and for the benefit of the joint family.
(2) The answer is in accordance with the preceding answer.
The mere constitution of partnership between some members of the family will not preclude the assessment in cases where the partnership is
carried on behalf of, and for the benefit of the joint family.
As we have been unable on the materials before us to give a final determination of the rights of the parties, we make no order as to costs.