Firm registration and partnership deeds do not conclusively bar assessment to undivided Hindu family super-tax; facts determine.

Registration of a firm or execution of a partnership deed between family members does not conclusively preclude assessment of income to the undivided Hindu family for super-tax. The controlling principle is whether the business was in fact carried on on behalf of and for the benefit of the joint family; if family property was invested or the enterprise benefited the family, the income may be assessed as family income. Determination of that factual question rests with the tax authority (Commissioner) and is decisive for whether assessment to super-tax of the family is permissible.

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Issues: (i) Whether the registration of brothers as a firm under Section 2(12) of the Income Tax Act, VII of 1918 precludes assessment of the family as an undivided Hindu family to super-tax or the income derived from the business of the firm; (ii) Whether the mere constitution of a partnership between some members of the family by a formal document precludes assessment of the partnership income to super-tax as part of the undivided family income.

Issue (i): Whether registration of the brothers as a firm precludes assessment of the family as an undivided Hindu family to super-tax.

Analysis: The registration of a firm is not conclusive on the question whether the business was carried on on behalf of and for the benefit of the joint family. Members of a joint family may trade either by involving joint family funds or by conducting trade as individuals with funds treated as loans repayable with interest. Determination whether the firm carried on business for the benefit of the joint family depends on factual inquiry into whether family property was invested or the business was conducted on behalf of the family; that factual determination is primarily for the Commissioner.

Conclusion: Registration of the firm does not in itself preclude assessment of the family as an undivided Hindu family to super-tax; assessment as a family is possible unless it is shown that the firm was not carried on on behalf of and for the benefit of the joint family.

Issue (ii): Whether a formal partnership between some family members precludes assessment of partnership income as part of undivided family income.

Analysis: A formal partnership deed between some members of a joint family governs inter se relations but does not conclusively determine whether the business was conducted for the benefit of the joint family. If the partnership was in fact conducted on behalf of and for the benefit of the joint family, its income may be assessed as family income; conversely, if the partnership represented distinct individual trading without involving family property, the income would be self-acquisition and not assessable as joint family income. The question turns on facts showing whether family property or benefit was involved.

Conclusion: The mere constitution of a partnership by family members does not preclude assessment of the partnership income as part of the undivided family income where the partnership is carried on on behalf of and for the benefit of the joint family; otherwise it does not.

Final Conclusion: The legal effect is that firm registration or a formal partnership does not bar assessment to super-tax of the undivided Hindu family where the business is shown to have been conducted on behalf of and for the benefit of the joint family; factual determination of that question lies with the tax authority and is necessary before final assessment.

Ratio Decidendi: Registration as a firm or the existence of a partnership deed is not conclusive; assessment to super-tax as an undivided Hindu family depends on whether the business was in fact carried on on behalf of and for the benefit of the joint family.

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