Partition of a Hindu undivided family business can be effected by entries in the books of account, and members of an undivided Hindu family can enter into a partnership in respect of a portion of the joint property they have partitioned among themselves.

1. In this case Messrs. Bhimraj Bansidhar carried on wholesale business in cloth and also owned house property in the town of Ranchi. The Hindu undivided, family carried on business till 29-6-1946 on which date the books of the business were closed, the accounts were taken and the net assets were divided among all the members of the Hindu undivided family, namely, Bhimraj (father), Janki Devi (mother), and five sons Atma Ram, Chiranjilal Sawarmal, Prabhu Dayal and Jagdish.

2. On 30-6-1946 a new business-under the same name of Bhimraj Bansidhar was started in the first instance with the four major sons as partners of the firm. A deed of partnership was executed by the four sons, Chiranjilal, Atma Ram, Sawarmal and Parbhu Dayal on 3-9-1946, indicating therein that the partnership was formed with retrospective effect from 30-6-1946. This agreement was varied by a second deed of partnership dated 30-10-1946, by which the benefits of the partnership were extended to the minor son Jagdish. For the assessment year 1948-49, the Hindu undivided family filed a return showing an income of Rs. 2612/- and odd. It was claimed by Bansidhar, who filed the return as the karta, that the cloth business no longer belonged to the joint family but belonged to a partnership consisting of the five sons. The accounting year for which the return was filed was the Rathjatra year 2003-2004, which corresponds to 30-6-1946 to 19-6-1947.

An application for registration of the new firm signed by the four major sons and by the father acting for the minor son was also made to the Income-tax Officer who refused to register the firm on the ground that there had been no effective transfer of assets from the Hindu undivided family to the new partnership, and in any case the new partnership was not a genuine partnership and the ownership of the cloth business continued to remain incharge of the Hindu undivided family. The Income-tax Officer, therefore, rejected the application made by the partners for registration of the firm and at the same time increased the quantum of assessment upon the Hindu undivided family to a sum of Rs. 37,292.

An appeal was taken from the order of the Income-tax Officer to the Appellate Assistant Commissioner who dismissed the appeal and affirmed the decision of the Income-tax Officer on the ground that there was no valid transfer of the assets from the Hindu undivided family to the new partnership. The Hindu undivided, family through its karta Bansidhar and the partners of the newly constituted partnership preferred appeals before the Income-tax Appellate Tribunal but these appeals were dismissed with slight modification and the decision of the Appellate Assistant Commissioner was affirmed as regards the quantum of assessment upon the Hindu undivided family and as regards the refusal to register the partnership under Sec.26A, Income-tax Act.

3. At the instance of the High Court the Income-tax Appellate Tribunal has referred the following question of law under Sec. 66(2), Income-tax Act:

"On the facts and circumstances found, did the entries in the books of account dated 29-6-1946, and the deeds of partnership executed on 3-9-1946 and 30-10-1946, constitute in law a disruption of the joint family status in respect of business and bring into existence a partnership firm entitled to registration under Sec.26A, Income-tax Act, and was it open to the income-tax authorities to come to a contrary decision."

The contention on behalf of the assessee is that there was no material before the Income-tax Appellate Tribunal for reaching the conclusion that there was no disruption of joint family status in respect of the business of cloth and there was no partnership firm constituted between the five sons of Bansidhar which was entitled to registration under Sec.26A, Income-tax Act.

4. Mr. Dutt conceded that the question involved is primarily a question of fact but argued that since there is no material in this case to support the finding of th