JUDGMENT : The Income Tax Appellate Tribunal, Patna, has referred to this Court under Section 66(2) of the Indian Income Tax Act, 1922 (Act XI of 1922 - hereinafter called the Act) the following question of law :- "Whether on the facts and circumstances of case the assessee is legally entitled to registration under Section 26A of the Income Tax Act on the basis of the deed of partnership dated 19th October, 1952 ?" Under Section 66(4) of the Act, Mahapatra and S.N.P. Singh, JJ., by their ORDER :made on the 10th of January, 1966 called for a further statement from the Tribunal on the points stated in that ORDER :. A supplementary statement has been made by the Tribunal in pursuance of the said direction. 2. One Ramlal had three sons, Surajmal, Ramrichpal and Chouthmal. Ramlal and Chouthmal died leaving behind Ramrichpal, his adopted son, five sons of Surajmal named Hardwarimal. Jagdish Narain, Chasilal, Jhabarmal and Kalyan Dutt, and Radheshyam, the remaining son of Chouthmal one of whose sons Matadm had been adopted by Ramrichpal. They were all members of a Hindu undivided family and were carrying on business at Bistupur in Jamshedpur under the name and style of Surajmal Ramrichpal. The family was assessed to income-tax till the assessment year 1952-53 as a Hindu undivided family. Sometime in July, 1952 it was claimed by the assessee that the three branches namely of Surajmal, Ramrichpal and Chouthmal, agreed to separate and effect amicable partition. In pursuance thereof and pending partition by metes and bounds, the three groups agreed that the assets of a small grocery shop, the business of which was carried on in the name and style of Surajmal Ramrichpal in Bistupur market, would be allotted to Surajmal's branch as a part of their share in the Hindu undivided family business. This group took actual possession of the stock of the goods in the shop on the 24th July, 1952, and the total assets amounting to Rs.6,636/- were divided equally between the five sons of Surajmal, each getting assets to the tune of Rs.1,327/-. It was further claimed that the five sons of Surajmal named above agreed to carry on the grocery business in partnership under the name of Jagdish Narain Jhabarmal, each partner contributing his share of the assets in the partnership amounting to Rs.1,327/-. It was further claimed that the five sons of Surajmal named above agreed to carry on the grocery business in partnership under the name of Jagdish Narain Jhabarmal, each partner contributing his share of the assets in the partnership amounting to Rs.1,327/-. The partnership business is said to have been carried on and from the 25th of July, 1952. Act instrument of partnership was executed on the 19th October, 1952, by and between the five sons of Surajmal. The fact of division of the assets of Rs.6,636/- on the 24th of July, 1952, was recorded in the instrument of partnership, a copy of which is Annexure A to the statement of the case. 3. There was a claim of partition under Section 25A of the Act which was accepted by the Income Tax Officer, Jamshedpur, by his ORDER :dated the 20th of January, 1956, who held that the Hindu undivided family continued as joint till the 31st July, 1952, after which there was a complete partition. A copy of the ORDER :dated the 20th January, 1956, is Annexure B to the statement of the case. The partition had been finally effected through Punches and a copy of their award dated the 17th January, 1953, is Annexure C. 4. An application for registration of the firm Jagdish Narain Jhabarmal as constituted under the deed of partnership dated the 19th October, 1952, which was the starting date of the accounting year in relation to the assessment year in question, i.e., 1954-55, was filed by the assessee on the 15th of July, 1955. The Income Tax officer refused to allow the registration under Section 26A of the Act by his ORDER :dated the 28th February, 1958 (Annexure D) on the following grounds: (1) The assets of Rs.6,636/- were claimed to have been partitioned amongst the five partners, namely the sons of Surajmal, on 24.7.52 while the ORDER :under Section 25A of the Act recognised partition of the family on and from the 31st of July, 1952. (2) In the books of the joint family entries regarding partition were made on the 28th July, 1952. Hence the five partners were still the members of the Hindu undivided family styled as Surajmal Ramrichpal until that date. (2) In the books of the joint family entries regarding partition were made on the 28th July, 1952. Hence the five partners were still the members of the Hindu undivided family styled as Surajmal Ramrichpal until that date. (3) The five sons of Surajmal had received a capital assets amounting to Rs.12,477/- and not Rs.6,636/- while the liabilities of Rs.56,765/- and the assets worth Rs.57,118/- had to be paid and realised by the three groups equally. (4) The applicant failed to file a copy of the opening form of the bank account in the Central Bank of India as directed by the Income Tax Officer to enable him to know the status shown there. (5) The return filed by the five partners for the accounting period ending with the 18th October, 1952, in relation to the assessment year 1953-54, showed the status as Hindu undivided family. 5. On appeal by the assessee filed from the ORDER :of the Income Tax Officer refusing registration under Section 26A of the Act, the Appellate Assistant Commissioner (a copy of whose ORDER :dated the 19th September, 1958 is Annexure E) expressed the view that there was no disruption of the joint family Surajmal Ramrichpal and that the ORDER :under Section 25A was erroneous and, therefore, the question of Surajmal group did not arise. On further appeal, the Appellate Tribunal, Calcutta Bench ‘B’ upheld the ORDER :agreeing with the Appellate Assistant Commissioner that the evidence on record did not show that the original Hindu undivided family styled as Surajmal Ramrichpal had been dissolved on the 31st July, 1952 as alleged or as found by the Income-Tax Officer in his ORDER :under Section 25A of the Act. On referring to certain letters and the a ward, the Tribunal came to the conclusion that the assessee's contention that the capital assets of the family were partitioned on the 24th July, 1952, was not supported. The balance sheet drawn on the 28th of July, 1962, showed that the assets and liabilities were joint until that date. The Tribunal further found, and found so chiefly, on the concession of the assessee's lawyer that the five sons of Surajmal remained joint and there was no partial partition between them inter se before they started the partnership. A copy of the Appellate Tribunal's ORDER :dated the 13th January, 1960, is Annexure H. 6. The Tribunal further found, and found so chiefly, on the concession of the assessee's lawyer that the five sons of Surajmal remained joint and there was no partial partition between them inter se before they started the partnership. A copy of the Appellate Tribunal's ORDER :dated the 13th January, 1960, is Annexure H. 6. It seems, a supplementary statement of the case was necessitated because the Income Tax Officer, the Appellate Assistant Commissioner as also the Tribunal proceeded to reject the application of the assessee for registration of its firm on erroneous and irrelevant grounds. The statement of the case as submitted to this Court did not bring about or mention clearly the relevant facts to enable this Court to answer the question of law referred to it. 7. In spite of the fact that the law was well established by the decision of the Privy Council in (1) Sir Sundar Singh Majithia V. The Commissioner of Income Tax (10 Income Tax Reports 457) and of this Court in (2) R.B. Bansidhar Dhandhania V. Commissioner of Income Tax (12 Income Tax Reports 126) and (3) Bhimraj Bansidhar V. Commissioner of Income Tax (26 Income Tax Reports 185) as also of the Madras High Court in (4) South Indian Lucifer Match Works V. Commissioner of Income Tax (43 Income Tax Reports 319), that even though a Hindu family remained undivided and joint, the members constituting it could effect a partial partition of some of the assets belonging to the family and own them separately, a confusion was created in all the three ORDER :s by not keeping in mind the clear enunciation of law made by the several authorities; 8. Sir George Rankin, delivering the JUDGMENT : on behalf of the Judicial Committee in (1) Sundar Singh Majithia's case (10 Income Tax Reports 457) pointed out at page 464 of the Report that Section 25 A of the Act contains no warrant for the view that members of an undivided Hindu family cannot enter into a partnership in respect of a portion of the joint family property which they had partitioned amongst themselves. This case was followed in (2) Dhandhania's case (12 Income Tax Reports 126) by this Court and partial partition was accepted. This case was followed in (2) Dhandhania's case (12 Income Tax Reports 126) by this Court and partial partition was accepted. In the case of (3) Bhimraj Bansidhar (26 Income Tax Reports 185) a bench of this Court pointed out at page 192 of the Report-"It is a well settled proposition that for an agreement to partition the assets of a Hindu family no document is necessary and further Section 25 A of the Indian Income Tax Act does not prohibit members of an undivided Hindu family from entering into a partnership in respect of a portion of joint property which they have partitioned among themselves." Almost in the same language identical view has been expressed by the bench of the Madras High Court in the case of (4) South Indian Lucifer Match Works (43 Income Tax Reports 319) at page 326 of the Report. 9. Out of the five grounds given by the Income Tax Officer for rejection of the application for registration, it would be noticed that the first two were given under a mistaken notion of law and the three under a mistaken notion of fact. It appears from the facts stated in the various annexures and also in the statement of the case that the joint family disrupted on the 24th of July, 1952, in the sense it is understood under the Hindu law. It further appears from the supplementary statement of the case, which will be referred to hereinafter, that the stock of the Bistupur shop, the value of which was Rs.5,928/- and odd, and the cash balance of that shop amounting to Rs.707/- and odd were allotted and given to the five sons of Surajmal on the 24th J0uly, 1952. The process of partition (after the disruption of the family) of the assets belonging to the family started on the 24th of July, 1952. The final balance sheet of the joint family was prepared on the 28th of July, 1952, and according to the finding of the Income Tax Officer recorded under Section 25A of the Act, the partition was complete within the meaning of the said provision of law on the 31st of July, 1952. We are not concerned in this reference about the correctness or vadity of that finding recorded by the Income Tax Officer under section 25A of the Act. We are not concerned in this reference about the correctness or vadity of that finding recorded by the Income Tax Officer under section 25A of the Act. The fact to be emphasised here, however, is that on the 24th of July, 1952, there was no complete division and partition of the Hindu undivided family and its assets within the meaning of Section 25A of the Act. On that date the family can be said to be undivided for the purposes of the Income Tax Act. The total assets out of which the capital assets to the tune of Rs.12,447/- was allotted to the sons of Surajmal came to be finally divided and so allotted on the 28th of July, 1952. But the relevant question for investigation in this case was as to whether the claim of the assessee that the assets of the Bistupur grocery shop had been allotted to the sons of Surajmal on the 24th of July, 1952, was correct or not. The Income Tax Officer instead of applying his mind to the relevant fact made a confusion in stating in the said three grounds that the capital finally allotted to the sons of Surajmal on the 28th July, 1952, was more than the assets of the Bistupur shop. As regards ground Nos. 4 and 5 mentioned by the Income Tax Officer, suffice it to say that the Appellate Assistant Commissioner or the Tribunal in their appellate ORDER :s did not sustain refusal of registration on either of these two grounds. It may also be mentioned here that the assessee had filed an affidavit stating that for the accounting period of few months, starting from the 25th of July, 1952 and ending on the 18th of October, 1952, the return was shown as being on behalf of Hindu undivided family on the direction of the Income-tax Officer. A counter affidavit was sought to be filed by the department before the Tribunal when it was dealing with [he matter for a supplementary statement of the case under Section 66(4) of the Act, but this counter affidavit was not accepted by the Tribunal. A counter affidavit was sought to be filed by the department before the Tribunal when it was dealing with [he matter for a supplementary statement of the case under Section 66(4) of the Act, but this counter affidavit was not accepted by the Tribunal. It may also be stated that the non-filing of the copy of the opening form of the bank account in the Central Bank of India in the earlier period could not affect the consideration of the validity and genuineness of the partnership in the period in question which is from the 19th of October, 1952, to the 6th of November, 1953, i.e. the Diwali year, in relation to the assessment year 1954-55. The instrument of partnership was executed on the 19th of October, 1952, on the very first day of the accounting year in question, and the question before the authorities was as to whether the partnership was genuine or not. The Income-tax Officer did not hold against the assessee on any relevant ground, rather, the finding was based upon irrelevant and erroneous considerations. 10. The ORDER :of the Appellate Assistant Commissioner as I read it is wholly based on the finding "that there has been no genuine partition of the H.U.F. Messrs Surajmal Ramrichpal and that the family still continues undivided." This finding was recorded after scrutinising the ORDER :of the Income-tax Officer made under Section 25 A of the Act overruling the objection of the assessee that such a matter was beyond the scope of the appeal filed by it from the ORDER :of the Income-tax Officer under Section 26 A of the Act, I need not express any opinion in this reference as to whether the preliminary objection was overruled rightly or wrongly. But it is clear that after recording this finding the Appellate Assistant Commissioner fell into a serious error of law in saying thereafter-"In this view of the matter the question of further" partition between the members of the Surajmal group of that family does not arise and consequently I hold that "the I.T.O. was justified in refusing to treat the partnership as a genuine, thereby rejecting the application for registration under Section 26 A." 11. More or less on the same grounds, the refusal of registration was maintained by the Appellate Tribunal in its ORDER :dated the 13th January, 1960. More or less on the same grounds, the refusal of registration was maintained by the Appellate Tribunal in its ORDER :dated the 13th January, 1960. The Tribunal agreed with the Appellate Assistant Commissioner that the evidence on record did n0t show that the original joint family styled as Surajmal Ramrichpal had been dissolved on the 31st July, 1962. The balance-sheet was drawn up on the 28th July, 1962, showing that the assets and liabilities of the family were joint on that date. It did not, however, care to examine or record a finding as to whether the claim of the assessee that the assets of the Bistupur grocery shop and the stock-in trade and cash to the tune of Rs.6,636/- had been partitioned and allotted to the branch of Surajmal or not. The Tribunal committed almost the same kind of error of law in paragraph four of its ORDER :as the one committed earlier while affirming the view of the Appellate Assistant Commissioner. It said that the five sons of Surajmal remained joint even after the alleged disruption of the original joint family of Surajmal Ramrichpal. There was no partition between them and they remained joint after disruption of the original joint family. Under some confusion it was also stated in the fourth paragraph of the ORDER :that there was no case that there was a partial partition between the five sons of Surajmal inter se before they started the partnership. I may quote here a line from the ORDER :of the Income-tax Officer (Annexure D) which says-"It was contended by them (assessee) that after the disruption of the main family by the assets received from the same were divided amongst the five members who started this firm". Such a confusion in the appellate ORDER :of the Tribunal as also in the statement of the case prepared by it necessitated the calling for the further statement under Section 66(4) of the Act. Their Lordships, Mahapatra and S.N.P. Singh, JJ., said in their ORDER :dated the 10th January, 1966:- "It is necessary, in our view, to know if there was any reference in the account books of Surajmal Ramrichpal to the giving of stock in trade and cash amounting to Rs.6,636/- to the branch of Surajmal by the undivided Hindu family on the 24th July, 1952, and if so, in what form and on which date". It is manifest that a further clarification of the fact and an additional statement was called for to enable this Court to answer the question of law referred to it under Section 66(2) of the Act. By necessary implication the Tribunal was asked to record a finding not only on the question of giving of stock-in-trade amounting to Rs.6,636/- to the branch of Surajmal by the undivided family of Surajmal and Ramrichpal but also as to whether inter 8e the five sons of Surajmal had divided the said assets before starting of their business of Jagdish Narain Jhabarmal. After submission of a further report by the Income-tax Officer as directed by the Tribunal, the latter has submitted a supplementary statement of the case under Section 66 of the Act, in which the Tribunal has clearly recorded a finding that the cash of Rs.707/- and stock of Rs.5,928/8/3 were indeed given and taken over by the assessee branch of the family when the Bistupur branch shop was taken over by it as a whole and that there was another division of these assets amongst the five sons of Surajmal on the 24th July, 1952, as stated by the assessee. 12. In (5) Lachhman Das V. Commissioner of Income-tax (16 Income Tax Reports 35), the Judicial Committee of the Privy Council pointed out at page 40 of the Report :- "Whatever the view of a Hindu joint family and its property might have been at the early stages of its development, their Lordships think that it is now firmly established that an individual coparcener, while remaining joint, can possess, enjoy and utilise, in any way he likes, property which was his individual property, not acquired with the aid of or with any detriment to the joint family property. It follows from this that to be able to utilise this property at his will, he must be accorded the freedom to enter into contractual relations with others, including his family, so long as it is represented in such transactions by a definite personality like its manager. In such a case he retains his share and interests in the property of the family, while he simultaneously enjoys the benefit of his separate property and the fruits of its investment. To be able to do this, it is not necessary for him to separate himself from his family." 13. In such a case he retains his share and interests in the property of the family, while he simultaneously enjoys the benefit of his separate property and the fruits of its investment. To be able to do this, it is not necessary for him to separate himself from his family." 13. The application for registration, undoubtedly, could be rejected on the ground that the claim of partial partition of the assets Bistupur establishment made between the five sons of Surajmal was not genuine and correct. Primarily, this will be a question of fact as contended by the learned counsel for the Income Tax Department. But since, in the first instance, there is no such finding in the appellate ORDER :recorded by the Income Tax Tribunal, and even if it be assumed that there is such a finding recorded, undoubtedly, there is no material in this case to support the said finding. As pointed out by the Bench of this Court in (3) Bhirmraj's case (26 Income Tax Reports 185 at 191), the question in such a situation would become a question of law. The Income Tax Appellate Tribunal in its appellate ORDER :maintained the refusal of the registration on irrelevant grounds, did not record any finding as to whether the claim of partial partition of the assets of Bistupur shop made by the assessee was correct or not, did not give any other reason to justify the rejection of the application for registration and hence I am of the view that the question of law can be answered in favour of the assessee even without the aid of the supplementary statement of the case and more so with it. In the supplementary statement, as pointed out earlier, the allotment and giving of the assets of Bistupur shop by the original Hindu undivided family Surajmal Ramrichpal to the branch of Surajmal has been stated to be correct. So also the claim of partition of those assets between the five sons of Surajmal before starting of their business on the 25th July, 1952, has been accepted and recorded as such in the supplementary statement in this case. That being so, I hold that, on the facts and in the circumstances of the case, the assessee is legally entitled to registration under Section 26A of the Act on the basis of I the deed of partnership dated the 19th October, 1952. 14. That being so, I hold that, on the facts and in the circumstances of the case, the assessee is legally entitled to registration under Section 26A of the Act on the basis of I the deed of partnership dated the 19th October, 1952. 14. The question is accordingly answered in favour of the assessee who is also entitled to costs of this reference : hearing fee Rs.100/- Question answered in favour of assessee.