Case: Commissioner of Income Tax, M.P Vs. Seth Govindram Sugar Mills

firm, but it may, through its karta enter into a valid partnership with a stranger or with the karta of another family. This Court in Kshetra Mohan Sanyasi Charan Sadhukhan v. Commr. of Excess Profits Tax, West Bengal, (1953) 24 ITR 488 : (AIR 1953 SC 516 ), pointed out that when two kartas of different families constituted a partnership the other members of the families did not become partners, though the kartas might be accountable to them.12. The question, therefore, is whether after the death of Nandlal the representatives of the two families constituted a new partnership and carried on the business of the Sugar Mills. Admittedly no fresh partnership deed was executed between Banarsibai, acting as the guardian of the minors in Nandlals branch of the family and Bachhulal. It is not disputed that partnership between the representatives of two families can be inferred from conduct. Doubtless the accounts produced before the Income-tax authorities disclosed that Bachhulal was carrying on the business of "Seth Govindram Sugar Mills Ltd." in the same manner as it was conducted before the death of Nandlal. Therein Kalooram Govindram and Gangaprasad Bachhulal were shown as partners, Govindram having 10 annas share and Bachhulal having 6 annas share. There were separate current accounts for the two parties. The Appellate Assistant Commissioner, who examined the accounts with care, gave the following details from the accounts as on November 1, 1948;Joint capital account of Kalooram Govindram and Gangaprasad Bachhulal in the ratio of 10 : 6. Credit balance ... 10,78,666/-Current Accounts :-Gangaprasad Bachhulal " ... 10,46,797/-Kalooram Govindram " ... 8,30,348/-Profit and loss Account. Debit balance ... 14,01,669/-13. No profit or loss was adjusted to the current account of the parties. Thereafter the accounts were closed as on 31st March, 1950, when the capital account was squared up by transferring that much loss from the profit and loss account and balance in the profit and loss account was transferred in the ratio of 10 : 6 to the current accounts of the two parties.14. Thus the profit and loss account showed:-Net debit balance including current years loss - 17,51,992/-Loss set off against capital account - 10,78,666/-Rs. 6,73,326/-Transferred to partners accounts:-Messrs. Kalooram Govindram 4,20,829/-Messrs. Gangaprasad Bachhulal 2,52,497/- 6,73,326/-Balance NilThe accounts only establish that Bachhulal was doing the business of Govindram Sugar Mills Ltd. But Banarsibais name was not found in the accounts. If she was a partner, her name should have found a place in the accounts. Not a single document has been produced on behalf of the assessee which supports the assertion that Banarsibai acted as a partner or was treated by the customers of the firm as a partner. There is not a title of evidence of conduct of Bachhulal, Banarsibai or even of third parties who had dealings with the firm to sustain the plea that Banarsibai was a partner of the firm. Indeed, the conduct of the parties was inconsistent with any such partnership between Banarsibai and Bachhulal. After the death of Nandlal Banarsibai and Shantibai applied to Jaora District Court for the appointment of guardians to look after the properties and the persons of the two minors: and on January 21, 1946, four persons other than these two widows were appointed as guardians of the minors. If Banarsibai was acting as a guardian of the minors representing the family in the business she would not have applied for the appointment of others as guardians. On October 4, 1952, a partnership deed was drawn up between Bachhulal on the one hand and the minors represented by the said four guardians on the other. If Banarsibai was the representative of the family in the business, this document would not have come into being. Banarsibai also had no place in another partnership deed which was executed on March 27, 1953, between Venkatlal represented by the aforesaid guardians and Bachhulal. The evidence, therefore, demonstrates beyond any reasonable doubt that Banarsibai was nowhere in the picture and that Bachhulal carried on the business of the Sugar Mills on behalf of the two families. Nor is there any evidence to show that from 1943 till the assessment year the guardians of the minors appointed by the District and Sessions Judge, Jaora, in 1946 representing the minors entered into a partnership with Bachhulal. The partnership deeds of 1952 and 1953 were subsequent to the order of assessment and they contain only self-serving statements and they cannot, in the absence of any evidence, sustain the plea of earlier partnership. Indeed, the guardians were only appointed for the properties situated within the jurisdiction of the District Judge, Jaora, and they could not act as guardians in respect of the properties outside the said jurisdiction. If they were acting as partners with Bachhulal their names would have been mentioned either in the accounts or in the relevant documents pertaining to the business. The conflicting version given by the assessee in regard to person or persons who actually represented the family in the partnership in itself indicates the falsity of the present version. It must, therefore, be held that the Court guardians did not enter into a partnership with Bachhulal.15. But, Venkatlal because a major on December 13, 1949, i.e., during the accounting year 1949-50. On October 17, 1951, an application for registration was received by the Income-tax Officer signed by Venkatlal and Bachhulal who are shown as partners representing their respective joint families. The return of income submitted along with the application for registration was signed by Venkatlal on August 29, 1951. After Venkatlal became a major, there was no obstacle in his representing his branch of the family in the partnership. Indeed, it was conceded in the High Court that there was a partnership from December 13, 1949, when Venkatlal attained majority. Having regard to the said circumstances and the concession. We must hold that from December 13, 1949, the business was carried on in partnership between Venkatlal, representing his branch of the family, and Bachhulal, representing his branch of the family.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The accounts only establish that Bachhulal was doing the business of Govindram Sugar Mills Ltd. But Banarsibais name was not found in the accounts. If she was a partner, her name should have found a place in the accounts. Not a single document has been produced on behalf of the assessee which supports the assertion that Banarsibai acted as a partner or was treated by the customers of the firm as a partner. There is not a title of evidence of conduct of Bachhulal, Banarsibai or even of third parties who had dealings with the firm to sustain the plea that Banarsibai was a partner of the firm. Indeed, the conduct of the parties was inconsistent with any such partnership between Banarsibai and Bachhulal. After the death of Nandlal Banarsibai and Shantibai applied to Jaora District Court for the appointment of guardians to look after the properties and the persons of the two minors: and on January 21, 1946, four persons other than these two widows were appointed as guardians of the minors. If Banarsibai was acting as a guardian of the minors representing the family in the business she would not have applied for the appointment of others as guardians. On October 4, 1952, a partnership deed was drawn up between Bachhulal on the one hand and the minors represented by the said four guardians on the other. If Banarsibai was the representative of the family in the business, this document would not have come into being. Banarsibai also had no place in another partnership deed which was executed on March 27, 1953, between Venkatlal represented by the aforesaid guardians and Bachhulal. The evidence, therefore, demonstrates beyond any reasonable doubt that Banarsibai was nowhere in the picture and that Bachhulal carried on the business of the Sugar Mills on behalf of the two families. Nor is there any evidence to show that from 1943 till the assessment year the guardians of the minors appointed by the District and Sessions Judge, Jaora, in 1946 representing the minors entered into a partnership with Bachhulal. The partnership deeds of 1952 and 1953 were subsequent to the order of assessment and they contain only self-serving statements and they cannot, in the absence of any evidence, sustain the plea of earlier partnership. Indeed, the guardians were only appointed for the properties situated within the jurisdiction of the District Judge, Jaora, and they could not act as guardians in respect of the properties outside the said jurisdiction. If they were acting as partners with Bachhulal their names would have been mentioned either in the accounts or in the relevant documents pertaining to the business. The conflicting version given by the assessee in regard to person or persons who actually represented the family in the partnership in itself indicates the falsity of the present version. It must, therefore, be held that the Court guardians did not enter into a partnership with Bachhulal.15. But, Venkatlal because a major on December 13, 1949, i.e., during the accounting year 1949-50. On October 17, 1951, an application for registration was received by the Income-tax Officer signed by Venkatlal and Bachhulal who are shown as partners representing their respective joint families. The return of income submitted along with the application for registration was signed by Venkatlal on August 29, 1951. After Venkatlal became a major, there was no obstacle in his representing his branch of the family in the partnership. Indeed, it was conceded in the High Court that there was a partnership from December 13, 1949, when Venkatlal attained majority. Having regard to the said circumstances and the concession. We must hold that from December 13, 1949, the business was carried on in partnership between Venkatlal, representing his branch of the family, and Bachhulal, representing his branch of the family.