Joint family funds used in partnership venture led profits to be treated as Hindu undivided family income.

Income from a new partnership venture was treated as Hindu undivided family income where the Tribunal found that the venture was financed entirely from joint family funds, the partners were family members representing the two family branches, no personal funds were invested, and goods were supplied from the family business without commission. On those factual findings, the members who executed the partnership were regarded as acting for the family rather than in their individual capacities, and the profits were attributed to the family. The question of any personal right to represent the family was treated as immaterial in light of the proven use of joint family resources.

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Issues: Whether the income arising from the new partnership business was assessable as the income of the Hindu undivided family, on the footing that the family funds were used and the family members who entered the partnership did so on behalf of the family.

Analysis: The Tribunal found that the entire funds for the new venture came from the earlier family business, that the two partners in the new business were members representing the two family branches, that no personal funds of those members were invested, and that the goods were supplied from the family business without commission. On those findings, the members who signed the partnership were treated as having entered the arrangement for the family business and not in their individual capacities. The question of their personal right to represent the family was treated as immaterial in view of the factual finding that the joint family funds were made available and utilised for the venture.

Conclusion: The income from the new partnership was held to belong to the Hindu undivided family and not to the individual members.

Final Conclusion: The reference was answered in favour of treating the partnership profits as family income on the facts found.

Ratio Decidendi: Where a partnership venture is financed entirely from joint family funds and the members concerned act for the family rather than in their personal capacity, the resulting profits are attributable to the Hindu undivided family.

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