Family capacity in partnership profits depends on clear deed recital and conduct, not on formalities or ancestral nucleus.

An unambiguous recital in a partnership deed that an assessee entered the firm as manager of a Hindu undivided family, coupled with the partnership actually functioning on that basis, was sufficient to show that the share of profits was received in a representative capacity. The absence of ancestral nucleus did not prevent self-acquired property from being impressed with the character of joint family property, and no additional formalities were required; intention was the ative factor. The capital source had already been treated as concluded by the income-tax authorities and was not reopened, and the Madras HC accepted the family-capacity character of the receipts.

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Issues: Whether the recital in the partnership deed, read with the fact that the partnership functioned, was sufficient to justify the inference that the assessee received his share of profits as manager of a Hindu undivided family.

Analysis: The source of the capital contribution was treated as concluded by the income-tax authorities and was not reopened. On the legal effect of the recital, the absence of ancestral nucleus did not prevent the assessee from impressing self-acquired property with the character of joint family property. No formalities were required; the decisive question was intention. An unambiguous declaration in a deed that the assessee was entering the partnership as manager of the undivided family, followed by actual functioning of the partnership on that basis, was sufficient to show that the share of profits was earned in a representative capacity.

Conclusion: The recital in the partnership deed, together with the subsequent working of the partnership, was sufficient to establish that the profits were received by the assessee as manager of the Hindu undivided family, and the answer was in favour of the assessee.

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