Judgement

VENKATARAMA AYYAR, J., The firm of Bhagat Ram Mohanlal which is the appellant before us, was constituted on 23-8-1940, and registered under S. 26-A, Indian Income-tax Act. The Partners of the firm, according to the registration certificate, were (1) Bhagat Ram Mohanlal, Hindu undivided family, (2) Richpal and (3) Gajadhar, their shares being respectively 8 annas, 4 annas and 4 annas. Mohanlal was the karta of the aforesaid joint family, which consisted of himself and his two brothers, Chhotelal and Bansilal, and he entered into the partnership as such karta.

The firm carried on business at Drug in Madhya Pradesh as the agent of the Government for the purchase of foodgrains, and during the accounting years ending 1943 and 1944, it made profits on which it was assessed to excess profits tax respectively of Rs. 10,023-5-0 and Rs. 13,005-5-0. During the year 1944-1945 it sustained a loss of Rs. 15,771, and adding it to the sum of Rs. 37,800 which was the standard profit for the business, the Excess Profits Tax Officer determined the deficiency of profits for the year at Rs. 53,571.

Section 7, Excess Profits Tax Act, hereinafter referred to as the Act, provides that when there is