Mehar Singh, C.J:— There is the Hindu undivided family of Kishori Lal with his three sons Sundar Lal, Indar Sam, and Parkash Chand. The Hindu undivided family was carrying on the business of timber under the name and style of Kishori Lal Sundar Lal. This was down to March 31, 1965. There was partial partition in the Hindu undivided family, in consequence of which the business of the Hindu undivided family firm Kishori Lal-Sundar Lal was taken over by a partnership consisting of the father and the three sons, which was a partnership comming into existence from April 1, 1955. Subsequently on June 9, 1955, Kishori Lal and his three sons executed a partnership deed, Annexure ‘F’, in which they said that they had partitioned the Hindu undivided family business so as to carry it in their individual family rights and liabilities as a separate partnership concern, that the entire capital investment in the business known as Kishori Lal-Sundar Lal was divided among the parties on April 1, 1955, and that the Hindu undivided family as such then ceased to have interest in that business on and from that date.
2. In the assessment years 1956–1957 and 1957–1958 the partnership firm Kishori Lal-Sundar Lal, it having continued the same name even after the members of the Hindu undivided family entered into the partnership, failed to persuade the Income Tax Authorities to register the firm under section 26-A of the Income Tax Act, 1922 (Act 11 of 1922), and so the firm was treated by the Income Tax Authorities as owned by the Hindu undivided family, even inspite of the deed of partnership between the father and the three sons. The partnership firm failed to obtain relief up to the Income Tax Appellate Tribunal.
3. The present reference concerns the assessment year 1958–1959. In regard to this particular assessment year the lower Income Tax Authorities adopted the same approach as in the previous two assessment years. They included the income from the timber business of Kishri Lal-Sundar Lal in the income of the Hindu undivided family of Kishori Lal but at the same time made a protective assessment on the firm Kishori Lal-Sundar Lal, assessing the income from its business in the hands of the firm. They also disallowed the claim of the partnership firm for registration under section 26-A. The reason upon which they proceeded was that so far as the business assets of the Hindu undivided family as timber business were concerned, the net result was liability as on April ???, 1955, amounting to Rs. 29,916/2/6 and that although the partnership consisting of the father and the sons claimed to have taken over that family timber business, they did not take over that liability of Rs. 29,916/2/6, which, on the contrary, was left to be paid by the Hindu undivided family of Kishori Lal and his three sons. On appeal the Income lax Appellate Tribunal in its order of October 28, 1964 reversed that order and came to the conclusion that the timber business owned by the Hindu undivided family Kishori Lal and his sons came to an end on March 31 and that business was taken over by the partnership of Kishori Lal and his three sons under the name and style of Kishori Lal-Sundar Lal on and from April 1, 1955. The Tribunal, therefore, allowed the claim of the partnership firm under section 28-A of the Act and came to the conclusion that no part of the income accruing from the business of firm Kishori Lal-Sundar Lal could form part of the income of the Hindu undivided family of Kishori Lal after April 1, 1955. It directed that the income of the partnership firm will be excluded from the income of Kishori Lal's Hindu undivided family and will be taken as income belonging to the partnership firm which, it said, was to be granted registration under section 26-A. The Tribunal proceeded to its conclusion upon this material—
(a) that on taking over the timber business on April 1, 1955, a personal account of each one of the partners was opened in the business books of the partnership firm,
(b) that whatever profit accrued during the first accounting year that was credited to all the partners, according to their shares, separately in their accounts, and
(c) that the subsequent conduct of the partners of the partnership firm was (i) opening bank account in the name of the partnership firm, informing the bank obviously about the change, (ii) having the firm registered with the Registrar of Firms, (iii) having recognition of the partnership firm by the Sales Tax Department, (iv) institution of suits by it, for recovery of its business debts by the partnership firm in its own name, and (v) payment of profession tax under a statute relating to such tax.
The Tribunal was of the opinion that the members of the Hindu undivided family could very well leave the liabilities of the business of that family in the amount as stated already to be paid by the Hindu undivided family while taking over the timber business without such liabilities by the partnership firm. So, considering the above material, it found as a fact that on and from April 1, 1955, the Hindu undivided family timber business was taken over by firm Kishori Lal-Sundar Lal, a registered partnership, and on that finding it decided as explained above.
4. On an application by the Commissioner of Income-Tax, Punjab, Jammu & Kashmir, and Himachal Pradesh, under sub-section (1) of section 66 of the Act, the Tribunal has made reference of these questions to this Court—
(1) Whether on the facts and in the circumstances of the case, notwithstanding the non division of the liabilities of the business, Messrs Kishori Lal-Sundar Lal, between the partitioning members of Hindu undivided family, there was a valid partial partition of the said business? and
(2) Whether on the facts and in the circumstancss of the case, the business Messrs Kishcri lal-Sundar Lal, constituted a firm, entitled to be registered under section 26-A of the Income-Tax Act, 1922?
5. The learned counsel for the Commissioner of Income-Tax has contended that while the Hindu law admits of partial partition but the legal bases for such partial partition must be complied with before it can be found to have been done. He has urged that not until the members of the Hindu undivided family divided both the assets as also the liabilities of the Hindu undivided family's timber business, could they be said to have succeeded in partial partition of the property of the family so far as the timber business of the family was concerned. In this case he has stressed that in fact there was division of nothing because the Tribunal has found that the net result of the consideration of the business assets of the timber business of the Hindu undivided family was liability, and the learned counsel urges that there were thus no assets to be divided. What was available for division was only the liability, which in fact was not divided. So nothing was divided and the deed of partition was merely a shadow transaction arrived at to escape liability for income tax. He refers to G. Venkataswami Naidu & Co. v. Commissioner Of Income-Tax . A.I.R 1959 S.C 359., to contend that after the Tribunal found primary evidentiary facts, then, in the present case, it had to apply legal principles in regard to partial partition to reach the conclusion whether the timber business continued to be the business of the Hindu undivided family of Kishori Lal or it became the business of the partnership firm, the subject of partial partition is dealt with in paragraph 328, at page 381, of Mulla's Hindu Law, 1966 Edition, and for the present purpose the manner and method of such partial partition is the same as that of partition, which subject is dealt with in paragraphs 322 and 325 of the same book. It is stated in paragraph 322 that “according to the true notion of an undivided Mitakshara family no individual member of that family, whilst it remains undivided, can predicate of the joint property, that he-that particular member has a certain definite share, one-third of one-fourth Partition according to that law consists in a numerical division of the property, in other words, it consists in defining the shares of the coparceners in the joint property; and actual division of the property by metes and bounds is not necessary.” And in paragraph 325 it is said ‘Partition is as severance of joint status, and as such it is a matter of individual volition. All that is necessary, therefore, to constitute a partition is a definite and unequivocal indication of his intention by a member of a joint family to separate himself from the family and enjoy his share in severalty.’ So partition in Hindu law is effected by a definite and unequivocal indication of a co-parcener's intention to separate, and obviously partial partition by the same coparcener is effected by his definite and unequivocal indication of his intention to partition a particular business or property of the joint family, leaving the rest as joint family property. The learned counsel for the Commissioner of Income Tax ??? that on the primary evidentiary facts found by the Tribunal, when the above legal principles in regard to partial partition in Hindu law are applied, what has been decided by the Tribunal is then a mixed question of fact and law this argument ignores the clear statement in the paragraphs already referred to that it is the intention of a coparcener which determines whether he has had partial partition or not. Intention is always a question of fact. So that when those principles of Hindu law in relation to partial partition are applied to the primary evidentiary facts found by the Tribunal, the conclusion reached in regard to the intention of the coparceners of Kishori Lal's Hindu undivided family still remains a conclusion of fact, being a conclusion on their intention in this respect. In Sir Sunder Singh Majithia v. The Commissioner of Income-Tax, C.P & U.P . 1942 10 I.T.R 57., their Lordships of the Privy Council, in regard to a somewhat similar partnership deed, held that “to decide that an instrument is in this sense not genuine is to come to a finding of fact whether there was evidence upon which it was open to the Income-tax authority to come to such a decision is a question of law.” So the Tribunal came to a finding of fact that the partnership between the members of the Hindu undivided family of Kishori Lal consisting of himself and his three sons was a genuine contract of partnership followed by a deed of partnership and conduct of the partners, which supported the existence of the contract of partnership. The finding was based on evidence and material which has already been listed above, and this is not a case in which an argument is open to the side of the Commissioner of Income Tax that than finding is not based on any evidence. In Commissioner Of Income Tax, West Bengal, Calcutta v. Juggilal Kamalapat . 1967 63 I.T.R 292., their Lordships of the Supreme Court held that the question whether, in fact, on the evidence, a firm had been constituted and came into ‘existence, is a pure question of fact on Which the decision of the Tribunal is final and no reference to the High Court would lie under section 68 of the Act.
6. It appears that it is to avoid what is now a settled position that on a question as to the constitution of the partnership firm of Kishori Lal and his three sons the finding of the Tribunal is not open to consideration in the High Court, that the shape has been given to the first question as it is. But the shape or form of the question is not material the question itself proceeds on the basis that in a case of the type as the present where there is no division of liabilities, there is no case of valid partial partition of the Hindu undivided family business, but the commissioner to divide the liabilities is only one factor for consideration. It is not the sole deciding factor. The Tribunal has considered at least seven other factors on which it has based its finding of fact. It has also considered that eighth factor, but has come to the conclus on that non-division of liabilities did not affect the question of effective partial partition of the joint family business by Kishori Lal and his three sons. Merely because the Tribunal has, after due consideration not found in favour of the Commissioner of Income-Tax on this one consideration, when its finding of fact is based on a number of other relevant pieces of evidence and considerations, a question of law does not arise in relation to its such finding of fact. The question assumes that non division of liabilities, in the facts and circumstances of this case, was a conclusive piece of evidence against the constitution of the firm. This certainly is not the case; and the Tribunal was justified ??? taking into consideration that factor and circumstance as also the other factors and circumstances and then reached its finding. When, after considering all these factors and circumstances, it had reached the conclusion that the partnership firm in this case was validly constituted, it is a finding of fact in regard to which no reference is competent under section 68 of the Act. The first question as posed does not, therefore, raise any question of law. It, in fact, seeks to re-open a finding of fact, which is not permissible in the shape of a reference to this Court. The answer to the first question is, therefore, in the affirmative that notwithstanding the non-division of the liabilities of the timber business of the Hindu undivided family of Kishori Lal, there was a valid partial partition among the members of that family passing on its Hindu undivided family business to the partnership of the members of that family.
7. The answer to the second question follows from the answer to the first question that the partnership firm Kishori Lal-Sundar Lal was validly constituted partnership firm and was entitled to be registered under section 26-A of the Act by the Income-Tax Authorities.
8. The Income-Tax Commissioner will bear the costs of the respondent, the counsel's fee being Rs. 100/-.
R.S Narula, J.:— I agree.
Reference answered.