Commissioner of Income Tax, Chittagong Vs. Mst. Safiya Bai, 31 DLR (AD) (1979) 41

Case No: Civil Appeal No. 72 of 1977

Judge: Ruhul Islam,

Court: Appellate Division ,,

Advocate: A.K.M. Mozammel Hoque Bhuiyan ,,

Citation: 31 DLR (AD) (1979) 41

Case Year: 1979

Appellant: Commissioner of Income Tax

Respondent: Mst. Safiya Bai

Subject: Income Tax, Fiscal Law,

Delivery Date: 1978-3-31

 
Supreme Court
Appellate Division
(Civil)
 
Present:
Fazle Munim, J.
Ruhul  Islam, J.
K.M Subhan. J.
 
Commissioner of Income Tax, Chittagong
...........Appellant
Vs.
Mst. Safiya Bai
.................Respondent
 
Judgment
March 31,1978.
 
Income Tax Act (11 of 1972)
Section 16 (3)(a)(i)
Admission—
According to plain and natural meaning, connotes a conscious act. It means the act of admitting someone. In the instant case the mother and her five minor children acquired shares in the firm by operation of the Muslim Law of inheritance on the death of the partner Taher ally Adamjee. The acquisition of interest by inheritance was not the result of any volition or conscious act on the part of the mother or her minor children. There is nothing to show that the mother acted out of her own volition with the purpose of deriving direct or indirect benefit from the arrangement that was made on the death of the major minor..... (5)
 
Case Referred to-
Mohori Bibi's case ILR 30 Calcutta 539 and 7 CWN (PC) 44.
 
Lawyers Involved:
A.K.M. Mozammel Haque Bhuiyan, Ad­vocate instructed by S.S Hoda, Advocate-on Record.—For the Appellant.
M. Hasan, Advocate instructed by S M. Huq, Advocate-on-Record-For the Respondent.
 
Civil Appeal No. 72 of 1977.
On appeal from the judgment dated May 18, 1973 pasted by the High Court Division in Reference Case No. 1 of 1972.
 
JUDGMENT
Ruhul Islam, J.
 
1. This appeal by special leave arises out of the judgment of a Division Bench of the High Court Division in Reference Case No. 1 of 1972 under section 66(1) of the Income Tax Act, 1922.
 
2. The brief facts leading lo the appeal are that Teherally Adamjee and Abdul Hussain Sulemanajee were carrying on partnership business under the name and style M/s Rangoon Mill Stores since April 1, 1951 with head office at 128, Jubilee Road, Chittagong. The firm dealt in mill stores, mill machineries, hardware, etc. Taherally Adamjee had 12 annas share and the other partner had 4 annas share. Taherally Adamjee died on July 1, 1957, leaving his wife Safiya Bai, three minor sons Roshan Ali, Mustaq Hussaln and Iqbal Husaain and two minor daughters Khairun-nessa and Sarina. With a view to continuing the existing partnership on March 3l, 1958 a deed was executed between the surviving partner Abul Hussain Sulemanji, Saiya Bai and her five minor children. The deed con­tained a recital to the effect that whereas on the death of Taherally Adamjee, his legal heirs have been admitted as partners in accordance with the provisions of partnership deed and whereas no normal deed has been drawn up so far, the parties desire to reduce in writing the terms and conditions of the partnership on which they have been work­ings so far and propose to work in future. Thereafter a supplementary agreement was executed on April 12, 1958 for removing some mistakes in the deed dated March 31, 1958. Abdul Hussain Sulemanjee continued to hold his share of 4 annas in the partnership and the remaining 12 annas share was distri­buted among the heirs of deceased Taheraliy Adamjee according to the shares fixed by the Muslim Law of Inheritance. The minors were admitted to the benefits of the partnership but they are not responsible for the loss. The firm was assessed in the status of a regis­tered firm for the charge years 1964-65, 1965-66, and 1966-67. The Income Tax Officer included the shares of the five minor children in   the mother's personal assessments under section 16(3)(a)(ii) of the Income-tax Act for all these years and the assessments were upheld by the Appellate Assistant Commissioner, on appeal before the Appellate Tribunal orders of assessments were set aside on October 30, 1970, In the judgment it was noticed that the amendment in section 16 (3) of the Income Tax Act which was made in 1965, not being retrospective in operation did not apply to the assessment for the year 1964-65. With regard to the assessments for other two years the Tribunal negatived the contention of the department, primarily, because the minor children had inherited their respective shares in the firm along with their mother nod by voluntary acts but through inheritance as a matter of course. Accordingly, the Tribunal excluded the minor’s share in the income from the personal assessment of their mother.
 
3. At the instance of the Commissioner of Income-Tax reference under section 66(1) of the Income-tax Act was made to the High Court for decision on the two questions formulated therein which are reproduced below:
 
"1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in excluding the share in­come of the minor children admitted to the benefit of partnership under the Partnership Act after death of their father from the personal assessment of their mother who also became a partner of the same firm holding the view that the amendment brought in section 16(3) of the Income Tax Act in 1965 has no retrospective effect?
 
4. Whether on the facts and in the circumstance of the case, the Tribunal was justified in excluding the share income of the minor children admitted to the benefit of partnership under the Partnership Act after the death of their father from the personal assessment of their mother who also became a part­ner of the same firm despite the provisions contained in section 16(3) (a) (ii) of the Income Tax Act?"
 
5. The learned Judge of the High Court Division after examining the provision of section 16(3)(a)(ii) of the Income Tax Act ex­pressed the opinion that 'admission' of minor children to the benefits of the partnership referred to in sub clause (ii) of clause (a) of subjection (3) of section 16 of the Income-tax Act does not extend to their inclusion into the benefits of the deceased partner by way of inheritance and in terms of the original partnership deed itself, Accordingly, the learned judges answered both the questions In the" affirmative. Against this judgment the department by special leave filed this appeal.
 
6.   Decision on the questions noted above, practically depends on the interpretation of the word admission, used in sub clause (ii) of clause (a) under sub-section (3) of section 16 of the Income Tax Act. Sub-section (3) (a) (ii) reads as under:
 
“(3) in computing the total income of any individual for the purpose of asse­ssment, there snail be included
(a) so much of the income of (the spouse) or minor child of such individual as arises directly or indirectly;
(ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner;"
 
The word admission according to plain and natural meaning connotes a conscious act. It means the act of admitting someone. In the instant case the mother and her five minor children acquired shares in the firm by ope­ration of the Muslim Law of inheritance on the death of the partner Taherally Adamjee. The acquisition of interest by inheritance was not the result of any volition or conscious act on the part of the mother or her minor children. There is nothing to show that the mother acted out of her own volition with the purpose of deriving direct or indirect benefit from arrangement that was made on the death of the major partner Taherally Adamjes.
 
7.   Mr. M. Mozammel  Hoque Bhuiyan, the learned  Counsel appearing for the appel­lant contends that for arriving at a  correct decision  on the  question it is to b« examined as to whether the agreement  dated March 31,1958 amended on April 12, 1958 amo­unted to an agreement which brought about a new partnership, wherein the mother intro­duced her minor children to the benefit of the existing partnership" and on account of admission of the minors to the benefit of the new partnership, section 16 (3) (a) (ii) of the Income-tax Act becomes attracted. Ac­cording to him, the word admission of the minors by inheritance or otherwise is not material for consideration. But the fact is that the minors became partners of the firm not by operation of the Law of Inheritance but by virtue of a contract entered into through their natural guardian, the mother, because in the absence of the deed executed on March 31, 1958 which was amended on April 12, 1958 the minors could not be ad­mitted to the benefit of the partnership.
 
8. Mr. M. Hasan, the learned Counsel appearing for the respondent, however, sub­mits that the legislative intention for creating this legal fiction for inclusion of income of spouse or a minor child in computation of a total income of any individual, has no application to the facts of the case. The learned Counsel submits that it is not correct to say that the very fact that Saflya Bai and her minor children were admitted to the benefits of the partnership in place of the- deceased partner Taherally Adamjee in accordance with clause 14 of the original partnership deed, is sufficient to bring it with­in the purview of section 16 (3) (a) (ii) of the Income-Tax Act. He submits that Safiya Bai and her minor children inherited their respective shares in the property left by Taherally Adamjee in accordance with the Muslim Law of Inheritance Their acquisition of interest in the property left by Taberally Adamjee in the partnership business would have been accomplished even in the absence of clause 14 of the original partnership deed. Clause 14 of the partnership deed only pre­vented a consequence of law, that is, dis­solution of partnership on the death of a partner. The clause provides as under:
 
"The death or retirement of any partner shall not determine the partnership hereby agreed upon but shall continue between the surviving and the heirs of deceased partner on the same terms and conditions   as therein."
 
9. Mr. Mozammel Hoque Bhuiya, however submitted that the minors were admit­ted to the benefits of the partnership but they are not responsible for the loss of the firm. This position in law lends support to the case of the department that the minors become partneis of the firm not by operation of law but by virtue of a contract Catered through their natural guardian, the mother. Mr. Hasan in answering this contention submitted that section 30 of the Partnership Act. 1932 makes a special provision for admitting minors to the benefits of the partnership in spite of the general incapacity of a minor to enter  into a contract in view of the bar under section 11 of the Contract Act and the deci­sion of the  Privy Council in Mohori Bibi's case ILR 30 Calcutta 539 corresponding to 7 CWN (PC) 44. Under section 30, a minor can be admitted to the benefits of the part­nership that is in existence, but cannot be bound by an agreement whereby a new part­nership is constituted. The contention of the department that on the death of Taberally Adamjee by executing the agreement dated March 31,1958 subsequently amended by a supplemental agreement dated April 12,1958 a new partnership was created, runs counter to the special provision as contained in sec­tion 30 of the Partnership Act which, in essence, provides that a minor can be admitted to the benefits of the partnership, that is already in existence, but cannot be bound by an agreement where by a new partnership is constituted. He further submits that it is not correct to say that the minor is not liable for the loss incurred by the partnership, only difference being that the minor is not to be made liable personally. A minor who hat been admitted into the benefits of partnership in view of provisions of section 30 of the Partnership Act, remains liable to bear loss to the extent of his share in the partnership.
 
10. We have no doubt that the minor's admission to the benefits of the existing partnership was not as a result of any conscious act of the parties but by operation of the Muslim Law of Inheritance governing them. In other words, the word 'admission’ does not contemplate admission of minor children of the deceased partner who acquired interest in the partnership by operation of their per­sonal law of inheritance and in accordance with the provisions of the original deed of partnership to the benefits of the partnership, in such a case section 16(3) (a) (ii) of the In­come-tax Act has no application In our opinion, there is no substance in the conten­tion of the applicants as the question has been rightly answered by the High Court.
 
Therefore, the appeal is dismissed without costs.
 
Ed.