COMMISSIONER OF INCOME-TAX, MADHYA PRADESH, A NAGPUR versus SETH GOVINDRAM SUGAR MILLS LTD.

Citation: [1965] 3 S.C.R. 488 · Decided: 26-03-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Judgment (excerpt)

COMMISSIONER OF INCOME-TAX, MADHYA PRADESH, 
A 
NAGPUR 
v. 
SETH GOVINDRAM SUGAR MILLS LTD. 
March 26, 1965 
JK. SUBBA RAO, J.C. SHAH ANDS. M. SIKRI, JJ.J 
. Partnership Act (9 of 1932), ss. 31 and 42(c)-Sco:oe of-Two joint 
Hindu families-Partmership 
between-When po.i;sfbie--!nconie-ta:c 
Act (11 of 1922), s. 164(1). 
· 
A joint Hindu family consisting of two branches owned a sugar 
mill. After partition, the two kartas entered into a partnership in 1943. 
to carry on the business of the sugar mill. The two partners repre-
sented the respective joint families, and the partnership deed provid-
ed that the death of any of .the parties shall not dissolve the partner-
ship and either the legal heir or the nominee of the deceased partner 
,·hould take his place. One of the kartas died in 1945 leaving as mem-
of his branch of the family, three v.1idov,1s and two minor sons. 
The other partner continued the business of the sui<ar mill in the firm 
name. For the assessment year 1950-51, the assessee (respondent-firm) 
applied for registration on the basis of the partnership agreement of 
1943. The Income-tax Officer, Appellate Assistant Commissioner And 
the Tribunal held that there was no partnership between the members 
of the two families after the death of one of the k<iTtas. On a reference 
to the High Court, it was held that the partnership business wa• 
carried on by the representatives of the two families after the de3th 
of one of the kartas. 
In the appeal to this Cuurt, on the question as to whether during 
the assessment year 1950-51, the assessee, was a flrm within the mean-
ing of s. lR(l) of the Income-tax Act, 1922, or an association of persons, 
HELD: The High Court was wrong in its finding. But, as a result 
of the concession by the appellant, that there was a partneri:hip from 
13th December 1949, when one of the minor_ sons had become a major, 
the status of the assessee was that of a firm for the assessment year 
rn5o-5L r49BBJ 
A joint Hindu family as such cannot be a partner of a firm, but it 
may through its karta enter into a partnershlp with the karta of 
another family. [4f15H] 
, 
Kshetra Mohan Saiiuasi Charan Sadhukhan v. Commissioner of 
Excess Profits Tax .. (1954] S.C.R. 268. followed. 
A wido\v, though a member of a 
family, cannot become its 
manager. [ 495B] 
· 
Commissivner of Income-tax. C.P. & Berar v. Seth Lakshmi Nara-
yan Raghunathdas, (19481 16 I.T.R. 313 and Pandurang Dakhe v. 
B 
c 
D 
E 
F 
G 
Pand1irang Gorle, l.L.R. (19471 NM. 299. overruled. 
H 
Therefore, in the instant case, when one of the kartas died, the 
partnen;hip had come to an end. There was no scope for applying 
s. 42(c) of the Partnership Act. 1932, because, the section is applicable 
only to a partnership with more than two partners. In such a case. 
if one of them dies, the firm is dissolved, but if there is a contract to 
488 
c. I. T. v. GOVINDRAM Mll,LS (Subba,Ruo, J.) 
489 
A the contrary, the surviving partners will continue the firm. On the 
'>ther hand, if there are only two partners and one of them dies, the 
firm automatically comes to an end and, thereafter, there ls no part. 
nership for a third party to be introduced.· Section 31, which deals 
with the validity of a contract between the partners to introduce a 
third party into the partnership without the consent of all the exist-
ing partners, presupposes the subsistence of a partnership and does 
B not cpply to a partnership of two partners. which is dissolved by 
the death of one of them. [ 492E-H] 
Hansraj Manot v. Me'8rs. Gorak NOJth Pandey, (1961) 66 C.W.N 
262, disapproved. 
Further. there was no evidence that the representatives of the 
two famil'es constituted a new partnership and carried on the busi-
ness of the sugar mill before 13th December 1949, when, it was con-
e ceded a new partnership had come into existence. 
C1v1L APPELLATE JURISDICTION: Civil Appeal Nos. 38 and 39 
of 1964. 
Appeals from the judgment and order dated April 10, 1961 of 
the Madhya Pradesh High Court in Miscellane-ous Civil Case No. 
D 63 of 1961. 
ll 
C. K. Daphtary, Attorney-General, R. Ganapathy Iyer and 
R. N. Sachthey, for the appellant (for both the appeals). 
N. D. Karkhanis, Rameshwar Nath, S. N. Andley and P. L. 
Vohra, for the respondent (in both the appeals). 
The Judgment of the Court was delivered by 
.Subba Rao, J. These two appeals by certificate arise out of the 
judgment of the High Court of Madhya Pradesh, Jabalpur, in Mis-
cellaneous Case No. 63

Excerpt shown. Read the full judgment & AI analysis in Lexace.