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1957 Supreme(P&H) 181
PUNJAB & HARYANA HIGH COURT
Bhandari and Mehar Singh JJ.
Behari Lal Beni Parshad
Versus
Commissioner Of Income-tax, Delhi, Ajmer, Rajasthan And Madhya Pradesh
Income Tax Case No. 11-D of 1954,
Decided On : DECEMBER 26, 1957
The High Court has no jurisdiction to interfere with a finding of fact made by the Tribunal if there is evidence to support the finding.
Headnote:
INCOME TAX - Assessment - Partnership - Share of profits - Whether eleven annas share in Jaipuria firm was the individual share of Chuni Lal or of the family firm - Whether payment of Rs. 40,000 to Mr. E. V. Crushandal was capital expenditure or revenue expenditure.
Fact of the Case:
Chuni Lal, a member of the Hindu undivided family (HUF) known as Behari Lal-Beni Parshad, entered into a partnership with Baij Nath Bajoria to purchase and acquire armour plates from the Field Liquidation Commission. The partnership was in the name of Chuni Lal Jaipuria, and Chuni Lal held an eleven annas share, while Baij Nath Bajoria held a five annas share. The HUF provided the capital for the partnership, and Chuni Lal did not contribute any capital himself. The partnership made profits, and the Income-tax Officer (ITO) assessed the HUF on the profits attributable to the eleven annas share, holding that the share belonged to the HUF and not to Chuni Lal individually. Chuni Lal appealed to the Appellate Assistant Commissioner of Income-tax (AAC), who upheld the ITO's decision. Chuni Lal then appealed to the Income-tax Tribunal (Tribunal), which also upheld the ITO's decision. Chuni Lal and the HUF filed applications under section 66(2) of the Income-tax Act, 1922, seeking a reference to the High Court on various questions, including whether the eleven annas share belonged to the HUF or to Chuni Lal individually and whether the payment of Rs. 40,000 to Mr. E. V. Crushandal was capital expenditure or revenue expenditure.
Finding of the Court:
The High Court held that the Tribunal's finding that the eleven annas share belonged to the HUF and not to Chuni Lal individually was a finding of fact based on evidence and that it had no jurisdiction to interfere with such a finding. The Court also held that the Tribunal's finding that the payment of Rs. 40,000 to Mr. E. V. Crushandal was capital expenditure and not revenue expenditure was not erroneous.
Issues: 1. Whether the eleven annas share in the Jaipuria firm was the individual share of Chuni Lal or of the HUF. 2. Whether the payment of Rs. 40,000 to Mr. E. V. Crushandal was capital expenditure or revenue expenditure.
Ratio Decidendi: 1. The Tribunal's finding that the eleven annas share belonged to the HUF and not to Chuni Lal individually was a finding of fact based on evidence, and the High Court had no jurisdiction to interfere with such a finding. 2. The Tribunal's finding that the payment of Rs. 40,000 to Mr. E. V. Crushandal was capital expenditure and not revenue expenditure was not erroneous.
Final Decision: The High Court dismissed the applications filed by Chuni Lal and the HUF.
MEHAR SINGH, J.
1. This judgment will dispose of two applications under section 66 (2) of the Income-tax Act, 1922, being Income-tax Cases Nos. 11-D and 12-D of 1954.
2. There were three members, Beni Parshad and his two sons ChuniLal and Mahabir Parshad of the Hindi undivided family (to be referred to as "the family" hereafter) which carried on business of various kinds in the name of firm Behari Lal-Beni Parshad which will be referred to as "the family firm". Beni Parshad died at the age of 58 years, on December 10, 1948. Of his sons Chuni Lal because major in 1942 and Mahabir Parshad in 1950. Something, in 1944 Chuni Lal started business of his own in the name and style of Chuni Lal Jaipuria, which will hereafter be referred to as "the Jaipuria firm". On February 2, 1946, Chuni Lal, representing his own individual firm, "the Jaipuria firm", entered into partnership with Baij Nath Bajoria and it is said that if fact the deed of partnership was executed between them on February 7, 1946. That was a partnership for purchase and acquisition of armour plates from the Field Liquidation Commission. In the Jaipuria firm the share of Chuni Lal was eleven annas and of Baij Nath Bajoria five annas in a rupee. Baij Nath Bajoria subscribed Rs. 1,50,000 towards the capital of the partnership but Chuni Lal did not subscribed any capital himself and the rest of the capital of the partnership was to come from the family firm. It appears that the Jaipuria firm made profits on its armour plates business and in that connection, in the assessment year 1947-48, the family firm was assessed to Income-tax Officer, B. 1 Ward of Delhi, on March 18, 1949. The Income-tax Officer found that the eleven annas share in the Jaipuria firm was not the personal and individual share of Chuni Lal by was the share of the family firm. The reasons given by the Income-tax Officer for coming to this conclusion are (a) that no capital was invested by Chuni Lal himself fin the Jaipuria firm, (b) (i) that on February 12, 1946, the family firm paid Rs. 40,000 to one Mr. E. V. Crushandal to remove him from competition for the contract for armour plates business, (ii) that on February 4, 1946, Rs. 99,132 were paid as custom duty by the family firm for the Jaipuria firm and (iii) that the total amount of payments made by the family firm to the American Field Commissioner came to about Rs. 3,30,440 as cost of the armour plates purchased in the name of Jaipuria firm, and that all these transactions were entered in full detail in the account books of the family firm, (c) that on dissolution of the Jaipuria firm partnership the five annas share coming to about Rs. 90,000 of Baij Nath Bajoria was paid to the latter by the family firm and not by Chuni Lal, (d) that Chuni Lal was having his separate account with the Bank of Jaipur Limited but he made no use of that in financing and investing moneys in the Jaipuria firm, (e) that Chuni Lal being a young man of about 22 years of age and not subscribing any capital himself was given a share of eleven annas in a rupee in the Jaipuria firm partnership simply because the family firm was financing the Jaipuria firm, otherwise the other partner could not possibly have conceded such a share to a man in the position of Chuni Lal, and (f) that it was not true that the family firm advanced a loan to the Jaipuria firm because (i) no collateral security was obtained, (ii) the advance was not a limp sum but of sums as and when required for the business of Jaipuria firm, and (iii) that no payment was directly made by the family firm to the Jaipuria firm but only adjustment entries were made in the account books. On consideration of all these reasons the Income-tax Officer came to the conclusion that the eleven annas share in the Jaipuria firm was the share of the family firm and no of Chuni Lal individually. The profits of the Jaipuria firm of the share of the family firm were taxed in the income of the latter. The family firm did not app
