Commissioner of Income Tax vs Birdhi Chand

The Income Tax Appellate Tribunal, Jaipur Bench, Jaipur ("the Tribunal" herein) has referred the following question for the opinion of this court arising out of its order dated December 1, 1976 :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the income of M/s. Curious House, M/s. Birdhichand Pannalal, Birdhichand & Sons and the income earned by Sarva Shri Onkarmal and Narainlal unseparated coparceners of the Hindu undivided family from the properties acquired out of Hindu undivided family funds were not includible as part of the income of the assessee, Shri Birdhichand, karta of M/s. Birdhichand Pannalal ?"

This question was referred in pursuance of the order dated January 9, 1980, passed in D. B. Income Tax Case No. 25/78 Additional Commissioner of Income Tax Vs. Birdichand Pannalal, by this court.

Mr. B.R. Arora, learned counsel for the Revenue states that in view of the answer given in Additional Commissioner of Income Tax Vs. Curious House and Birdhichand Pannalal, the question referred by the Tribunal has to be answered in the affirmative.

It was held in Addl. CIT''s case (supra), that Birdhi Chand in his capacity as karta of a Hindu undivided family could take one of his sons and thereafter both the sons as partner(s) even though they have not contributed anything by way of capital out of their self-acquired funds. It was also held that the registration or continuation of registration could not be refused to the firm.

While answering Additional Commissioner of Income Tax Vs. Birdichand Pannalal, it was held that the Tribunal was right in holding that the incomes of Curious House, Udaipur, Birdhichand Pannalal and Birdhi Chand & Sons, were not includible as part of the income of the assessee, Shri Birdhichand, karta of M/s. Birdhi Chand Pannalal. It follows, therefore, that in view of the aforesaid findings, the Tribunal was right in holding that the income of M/s. Birdhichand Pannalal, Birdhichand & Sons and M/s. Curious House, and the income earned by Sarva Shri Onkarmal and Narainlal, unseparated coparceners of the Hindu undivided family for the properties acquired out of Hindu undivided family funds were not includible as part of the income of the assessee, Shri Birdhichand, karta of Birdhichand Pannalal.

The question referred to us is answered in the affirmative, i.e., in favour of the assessee and against the Revenue.

In the circumstances of the case, the parties are left to bear their own costs of this reference. Let the Tribunal be informed of this order in accordance with Section 260(1) of the Income Tax Act, 1961.