A partition deed is evidence of a pre-existing fact, i.e., of throwing the self-acquired property into the hotchpotch.

Judgment

SIKRI, J. : This is an appeal by special leave directed against the judgment of the Madras High Court answering a question referred to it by the Appellate Tribunal against the Revenue. The Appellate Tribunal had referred the following three questions :

1. Whether there was material for the Tribunal to reach the conclusion that the various assets in question belonged only to the assessee in his individual capacity till 19th December, 1952 ?

2. If the answer to the first question is in the affirmative, whether the deed, Annexure B aforesaid, amounted to a transfer of assets to the three minor children aforesaid so as to attract the provisions of S. 16(3)(a)(iv) of the Income-tax Act?

3. If the answer to the first question is in the negative, the Income-tax Officer having rejected the claim of partition under S. 25A and the assessee not having independently appealed against such decision, whether the assessee is entitled in law to any modification of the assessment other than the status alone?

Question No. 1 was answered by the High Court in favour of the Revenue; question No. 2 against the Revenue and question No. 3 in favour of the assessee. The respondent, M. K. Stremann, hereinafter referred to as the assessee, has not filed any appeal against the answer given to question No. 1 and this has become final. From the way the questions have been worded, we are only concerned with the point whether the High Court rightly answered question No. 2.

2. The facts relevant for the disposal of this appeal are as follows. The father of the assessee, Kulandavelu Mudaliar, was an agent of Muller and Phipps (India) Ltd., for the sale of its pharmaceutical preparations in Madras. While he was an agent, the assessee was employed as an assistant by the said Company. Kulandavelu died on July 27, 1938, leaving a house property at Ayalur Muthiah Mudali Street, a few insurance policies and income-tax refunds due to him. The assessee realised a total amount of Rs. 26,600 from these and with these proceeds he purchased a house at No. 3, Varadarajulu Naidu Street in December, 1945. There is no dispute that this property was joint Hindu family property.

3. On the retirement of his father as agent of Muller and Phipps Ltd., the assessee was appointed as agent in his individual capacity. From 1938-39 till 1952-53, he was assessed as an individual not only on the income from the agency but also incomes from joint Hindu family property. He maintained only one set of accounts both for his income from the agency and from J. H. F. property. In 1944, one son was born, and another son was born in 1945.

4. On December 19, 1952, the assessee executed a deed of partition and on its basis claimed before the Income-tax Officer, in the course of assessment proceedings for the assessment year 1953-54. (accounting year ending March 31, 1953) that an order under S. 25A be passed and separate assessments made on each of the members of the erstwhile family as from December 19, 1952. The Income-tax Officer held that the mere existence of any ancestral property, however, small would not render all self acquired property part and parcel of the joint family assets by the mere fact that the incomes are not separately accounted for. He held that there was no partition but simply a case of donation made by the assessee of his own self-acquired property and S.16(3)(a) (iv) was attracted. In the alternative, he held that assuming that the assessee s assets have been "thrown into the common stock and after becoming assets of the joint family was divided between him and minor children, S. 16 (3) (a) (iv) is again attracted because the said section applies to both the direct and indirect transfers of the assets to minor children...... It would have been an indirect transfer to minor children if the transfer is effected by the interposition of a joint family by a legal fiction. "

5. On appeal, art additional point was sought to be made by the asscssee that the commission business w