Appeal No 108 of 1957
Appeal by special leave from the judgment and order dated February 16 1955 of the Bombay High Court in Income tax Reference No 35x of 1954
AV Viswanatha Sastri B K B Naidu and I N Shroff for the appellants
C K Daphtary Solicitor General of India K N Rajagopal Sastri and D Gupta for the respondents
March 15
The Judgment of the Court was delivered by HIDAYATULLAH J
This is an appeal with the Hid special leave of this Court against the judgment and order dated February 16 1955 of the High Court of Bombay in an Income tax Reference under section 662 of the Indian Income tax Act
The appellants are two assessees Charandas Haridas and Chinubhai Haridas whose cases are identical and in fact there was a consolidated reference by the Income tax Appellate Tribunal which was answered by the High Court by its judgment
The respondents are respectively the Commissioner of Income tax Bombay North Kutch and Saurashtra and the Commissioner of Income tax Delhi Ajmer Rajasthan and Madhya Bharat
The two appellants represented two units of Hindu undivided families
Charandas Haridas represented his wife three sons and himself and Chinubhai Haridas represented his wife son and himself
In stating the facts relative to the two families it will not be necessary to give them separately because the question which was answered by the High Court in the judgment under appeal arose in identical circumstances in the two families
The only difference is in the shares held respectively by the two Hindu undivided families in the managing 298 agencies to be hereafter mentioned
We will therefore confine ourselves to a statement of the facts relating to Charandas Haridas only
Charandas Haridas was the Karta of the Hindu undivided family consisting of his wife three sons and himself
He was a partner in six managing agency firms in six Mills
In previous years the income received by him as partner in these managing agencies was being assessed as the income of the Hindu undivided family
On December 31 1945 Charandas Haridas acting for his three minor sons and himself and Shantaben his wife entered into an oral agreement for a partial partition
By that agreement Charandas Haridas gave an one pie share to his daughter Pratima in the managing agency commission from two of the six managing agencies held by the family
The balance together with the shares in the other managing agencies was divided into five equal shares between Charandas Haridas his wife and sons
This agreement was to come into effect from January 1 1946 which was the beginning of a fresh accounting year
On September 11 1946 Charandas Haridas acting for himself and his minor sons and Shantaben executed a memorandum of partial partition in which the above facts were recited the document purporting to be a record of what had taken place orally earlier
In the assessment years 1947 48 and 1948 49 Charandas Haridas claimed that the income should no longer be treated as the income of the Hindu undivided family but as the separate income of the divided members
The Income tax Officer declined to treat the income as any but of the Hindu undivided family and assessed the income as before
An appeal to the Appellate Assistant Commissioner was unsuccessful and the matter was taken to the Income tax Appellate Tribunal
The Appellate Tribunal held that by the document in question the division if any was of the income and not of the assets from which the income was derived inasmuch as  the agreements of the managing agency with the managed Companies did not undergo any change whatever as a result of the alleged partition The Appellate Tribunal 299 therefore held that the arrangement to share the receipts from this source of income was not binding on the Department if the assets themselves continued to remain joint
It further held that the document was  a farce  and did not save the family from assessment as Hindu undivided family
The Tribunal having declined to state a ease under section 661 of the Indian Income tax Act Charandas Haridas moved the Bombay High Court and obtained an order under section 662 of the Act
The question on which the case was stated was  Whether there were materials to justify the finding of the Tribunal that the income in the share of the commission agency of the Mills was the income of the Hindu undivided family   The High Court stated that though the reference was very elaborately argued it raised a very simple question of fact and all that it was required to find out was whether there were materials before the Appellate Tribunal upon which the finding of fact could be rested
The High Court held that though the finding given by the Appellate Tribunal could not be construed as a finding that the document was not genuine the method adopted by the family to partition the assets was insufficient to bring about the result intended by it
According to the High Court the Appellate Tribunal war right in holding that the document was ineffective and though the income might have been purported to be divided and might in fact have been so divided the source of income
still remained united as belonging to the Hindu un divided family
It accordingly answered the question in the affirmative holding that there were materials before the Tribunal on which it could reach the conclusion that in so far as these income bearing assets were concerned they still belonged to the Hindu undivided family
Leave to appeal to this Court was refused by the High Court but Charandas Haridas applied to this Court and obtained special leave and the present appeal was filed
Mr Viswanatha Sastri appearing for Charandas Haridas pointed out that a Hindu undivided family cannot be a partner of a firm Charandasa Haridas 300 therefore though he represented the Hindu undivided family in his capacity as a partner could not insist that the other members of the family be received as partners or admitted to the benefits of partnership
The only mode in which the partition could be made was to divide the income and this bad the necessary effect in law of dividing the assets if not for the purposes of the Partnership Act at least for the purposes of assessing income tax
lie therefore contended that the Hindu undivided family which had ceased to exist in so far as these assets were concern ed could not be assessed as such after January 1 1946 the date from which the partition was effective
The learned Solicitor General for the Department contended that the argument itself involved the assumption that the assets were not in fact divided and since income tax was payable at the moment of time when income accrued this income must be taken to have accrued to the Hindu undivided family and its subsequent partition into five or six shares did not affect the position
Before we deal with these arguments it is necessary to quote the operative portion of the document which is as follows  Re Partial partition of the Hindu Undivided Family of Charandas Haridas of Ahmedabad
We the undersigned Sheth Charandas Haridas by himself and as the guardian of minors Rameshchandra Charandas Anilkumar Charandas and Gautamkumar Charandas and Shantaben Charandas all residing in Shahibaug Ahmedabad make this memorandum Nondh that we have a Hindu undivided family and Sheth Charandas Haridas manages our family s joint property as Karta or Manager and all of us as members of the joint undivided family are entitled to our joint undivided family as Malik
Our family received a commission of Re 0 1 11 5112 from the Vijaya Mills Co Ltd and out of this commission Sheth Charandas Haridas as Karta or Manager of the family has given already a commission of one pie to Pratima the daughter of the family
So also out of the commission of Re 0 2 12 received by the family from the Gopal 301 Mills Co Ltd Sheth Charandas Haridasas Karta and Manager has given already to Pratima one pie commission
After deducting these Re 0 1 10 512 and Re 0 1 11 commission remained
These commissions and other commission received from various other mills have been partitioned orally by us on Samvat Year 2002 Magsar Vadi 12 dated 31st December 1945
By this partition we decided that whatever commission fell due till 31 12 45 and which is received after 31 12 45 should be kept joint and in respect of the commission which accrues from 1 1 46 and received after that date each of us become absolute owner of his one fifth share and therefore from the dateie from 1 1 46 these commissions cease to be the joint property of our family
But it is our desire that we should keep a memorandum for our memory of the oral partial partition effected on Samvat Year 2002 Magsar Vadi 12 dated 31 12 45 pursuant to which we have partitioned the commissions to be received by our family
Because of this we keep this note
 The document no doubt mentions a commission in respect of each of the six managing agencies which commission was divided by the document
The word commission however has been used in two different senses sometimes it refers to the amount of the managing agency commission to be received by Charandas Haridas and sometimes to the right to that commission which Charandas Haridas bad as a partner
The sole question is whether the source was effectively divided for purposes of the Income tax law so that the assessment could not be made upon a Hindu undivided family
The law was stated by Mayne and approved by the Privy Council in Pichappa vs Chokalingam in the following words  Where a managing member of a joint family enters into a partnership with a stranger the other members of the family do not ipso facto become partners in the business so as to clothe them with all the rights and obligations of a partner as defined by the Indian Contract Act
In such a case the 1 AIR 1934 PC 192
39 302 family as a unit does not become a partner but only such of its members as in fact enter into a contractual relation with the stranger the partnership will be governed by the Act
 Further the Privy Council in Appovier vs Rama Subba Aiyan 1 observed  Nothing can express more definitely a conversion of the tenancy and with that conversion a change of the status of the family quad this property
The produce is no longer to be brought to the common chest as representing the income of an undivided property but the proceeds are to be enjoyed in six distinct equal shares by the members of the family who are thenceforth to become entitled to those definite shares
 The Bombay High Court quoted this passage and stated that there must be a division of the right as well as a division of the property and unless the division effected a separation of the property into shares it would remain only as a separation of the income after its accrual and would not affect the asset as such
In this view of the matter the Bombay High Court held that the asset continued to be joint in spite of the division of the income after its accrual
In our opinion here there are three different branches of law to notice
There is the law of Partnership which takes no account of a Hindu undivided family
There is also the Hindu law which permits a partition of the family and also a partial partition binding upon the family
There is then the Income tax law under which a particular income may be treated as the income of the Hindu undivided family or as the income of the separated members enjoying separate shares by partition
The fact of a partition in the Hindu law may have no effect upon the position of the partner in so far as the law of Partnership is concerned but it has full effect upon the family in so far as the Hindu law is concerned
Just as the fact of a Karta becoming a partner does not introduce the members of the undivided family into the partnership the division of the family does not change the position of the partner Vis a vis the other partner or partners
The Income 1 1866 11 MIA 75
303 tax law before the partition takes note factually of the position of the Karta and assesses not him qua partner but as representing the Hindu undivided family
In doing so the Income tax law looks not to the provisions of the Partnership Act but to the provisions of Hindu law
When once the family has disrupted the position under the partnership continues as before but the position under the Hindu law changes
There is then no Hindu undivided family as a unit of assessment in point of fact and the income which accrues cannot be said to be of a Hindu undivided family
There is nothing in the Indian Income tax law or the law of Partnership which prevents the members of a Hindu joint family from dividing any asset
Such division must of course be effective so as to bind the members but Hindu law does not further require that the property must in every case be partitioned by metes and bounds if separate enjoy ment can otherwise be secured according to the shares of the members
For an asset of this kind there was no other mode of partition open to the parties if they wished to retain the property and yet hold it not jointly but in severally and the law does not contemplate that a person should do the impossible
Indeed the result would have been the same even if the dividing members had said in so many words that they had partitioned the assets because in so far as the firms were concerned the step would have been wholly inconsequential
The respondent suggested that the family could have partitioned the managing agencies among the members of the family by balloting them severally but that would not have been possible without a dissolution of the managing agency firms and their reconstitution which was not altogether in the hands of Charandas Haridas
It was also suggested that the managing agencies could have been allotted to Charandas Haridas while the others took some other property or a receiver could have been appointed
No doubt there were many modes of partition which might have been adopted but the question remains that if the family desired to partition these assets only and no more could they have acted in some other manner 304 to achieve the same result No answer to this question was attempted
It is therefore manifest that the family took the fullest measure possible for dividing the joint interest into separate interests
There is no suggestion here that this division was a mere pretence nor has the Appellate Tribunal given such a finding
The document was fully effective between the members of the family and there was factually no Hindu undivided family in respect of these particular assets
The assets at all times stood in the name of Charandas Haridas and looked at from the point of view of the law of Partnership the family had no standing
The assets still are in the name of Charandas Haridas and looked again from the same viewpoint the division has no different signification
What has altered is the status of the family
While it was joint the Department could treat the income as that of the family but after partition the Department could not say that it was still the income of the Hindu undivided family when there was none
In the face of the finding that this was a genuine document and not a sham and that it effectually divided the income and in the circumstances the assets the question answers itself in the negative that is to say that there were no materials to justify the finding that the income in the share of the commission agency of the Mills was the income of the Hindu undivided family
The appeal will be allowed
The respondents will pay the costs of the two assessees here and below
There will be only one set of costs here
Appeal allowed


Summary:
The respondent a stenographer employed by the appellant at its head office in Bombay challenged the legality and pro priety of the dismissal order passed against him by an application under the provisions of the Bombay Industrial Relations Act 1946 and contended that the Notification No 1131 46 issued by the Government of Bombay in 1952 under section 24 of the said Act brought within its purview the head office of the appellant which was dealing in Sugar Industry
The appellant challenged the competency of the application on the ground that the Act did not apply to the respondent s case and the Labour Court had no jurisdiction as the Notification did not apply to the head office of the appellant Held that on a proper construction of the Notification it cannot be said that the Government of Bombay intended to extend the scope of the Notification to the head office of a Sugar Industry
The Notification did not bring within its purview the sugar industry as such but the manufacture of sugar and its by products the object being to confine its benefits to service or employment which was connected with the manufacture of sugar and its by products including the growing of sugar canes and all agricultural and industrial operations connected with the growing of sugarcane