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HINDU JOINT FAMILY AND BUSINESS UNDER HINDU FAMILY AND SEPARATE BUSINESS EXPLAINED


In a case before Supreme Court in P.S. Sairam vs R.S. Rama Rao, Reported in AIR 2004 SC 1619, It is well-settled that the immovable property which stands in the name of individual member, it is presumed to be belonging to joint family, provided it is proved that the joint family had sufficient nucleus at the time of its acquisition, but no such presumption can be applied to business. …………………. Reference in this connection may be made to a decision of this Court in the case of G.Narayana Raju v.G.Chamaraju & Others 1968(3) SCR 464 wherein in a suit for partition defence was taken that business of Ambika Stores was separate business of defendant as the business did not grow out of joint family funds or at least by efforts of members of joint family which was accepted by the trial court as well as the High Court. When the matter was brought to this Court in appeal, upholding the judgment of the High Court, the Court observed thus at page 466:- "It is well established that there is no presumption under Hindu Law that a business standing in the name of any member of the joint family is a joint family business even if that member is the manager of the joint family. Unless it could be shown that the business in the hands of the coparcener grew up with the assistance of the joint family property or joint family funds or that the earnings of the business were blended with the joint family estate, the business remains free and separate. "Explanation 1 to Section 6 of the Amendment Act lays down that for the purposes of this Section, the interest of a Hindu Mitakshara coparcener shall be deemed to be the share in the property that would have been allotted to him if a partition of the property had taken place immediately before his death, irrespective of the fact whether he was entitled to claim partition or not. This shows that for determining the interest of a male Hindu, a notional partition has to be assumed and the share in the joint family property, which could have been allocated to him in the notional partition, would devolve upon his heirs.

In the case of V.D.Dhanwatey v. The Commissioner of Income Tax, M.P.Nagpur (1968) 2 SCR 62, a Constitution Bench of this Court was also considering an appeal arising out of an order passed by the High Court on a reference. In that case, joint family funds were invested in a partnership business which enabled karta of the joint family to become a partner and when the remuneration was paid to him, it was assessed as income of the joint family and the view taken was upheld by this Court holding that as investment of the joint family funds in the partnership enabled a karta to become a partner and there being real and sufficient connection between that investment and the remuneration paid to the karta, the same has to be treated as income of the joint family. The Constitution Bench noticed the decision of this Court in the case of M/s Piyare Lal Adishwar Lal (supra) and, while approving the ratio of that case observed that as the remuneration earned by the karta was detrimental to the Hindu Joint Family funds, the High Court was justified in answering the reference against the assessee and in favour of the Revenue by holding that remuneration received by the karta was taxable in the hands of Hindu Undivided Family.






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