Commissioner of Income-tax Vs. 1. Joy Sukhlal SethiA. (i.T.R. No. 51 of 1975) 2. Keshrichand SethiA. (i.T.R. No. 52 of 1975). - Court Judgment

Excerpt:
- the following question of law has been referred under sub-section (1) of section 256 of the income-tax act, 1961 :"whether, on the facts and in the circumstances of the case, the tribunal was correct in law in holding that the assessee, shri joysukhlal sethia, cannot be assessed in the status of an association of persons, but that he should be assessed in the status of an individual in respect of his individual portion of the share of profits from the firm, keshrichand joysukhlal, for the assessment year 1967-68 and that the income in the name of joysukhlal sethia has to be treated as the income of each separated member of the hindu undivided family of which he was the karta ?"the assessee, joysukhlal sethia, was the karta of the erstwhile hindu undivided family. the assessee,.....

Judgment:

The following question of law has been referred under sub-section (1) of section 256 of the Income-tax Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee, Shri Joysukhlal Sethia, cannot be assessed in the status of an association of persons, but that he should be assessed in the status of an individual in respect of his individual portion of the share of profits from the firm, Keshrichand Joysukhlal, for the assessment year 1967-68 and that the income in the name of Joysukhlal Sethia has to be treated as the income of each separated member of the Hindu undivided family of which he was the karta ?"

The assessee, Joysukhlal Sethia, was the karta of the erstwhile Hindu undivided family. The assessee, as karta of the erstwhile Hindu undivided family, was a partner in the firm, Keshrichand Joysukhlal, and on the first day of the accounting year, a partial partition of the business assets of the Hindu undivided family was made and when this was represented before the Income-tax Officer, the partial partition was accepted under section 171 and even after the partial partition, the Hindu undivided family remained a partner of the firm.

In the relevant year 1967-68, the Income-tax Officer, on the above facts, held that no separate partnership deed was drawn up but the partnership was governed by the earlier deed and so he treated the assessee along with his grandsons as forming an association of persons. The Appellate Assistant Commissioner, on the same facts, reversed the findings of the Income-tax Officer and held that the assessee cannot be taxed as an association of persons and that he should be taxed as an individual and his individual portion in the partnership firm alone should be assessed : Against that order in appeal, the Revenue filed an appeal before the Appellate Tribunal.

The Appellate Tribunal noted the facts of partial partition but held that the assessee should be taxed as an individual, not as a partner of the firm, Keshrichand Joysukhlal, and confirmed the decision of the Appellate Assistant Commissioner. Aggrieved thereby, at the instance of the Revenue, the above question is referred for the answer of the court.

The relevant facts are already stated. We are of the opinion that the Tribunal was correct in holding that Shri Joysukhlal Sethia cannot be assessed as an association of persons. In that view, we answer the question in favour of the assessee.

Income-tax Reference No. 52 of 1975.

It is represented that the facts of the instant case are identical to those in Income-tax Reference No. 51 of 1975. Therefore we record the answer in favour of the assessee and against the Revenue.

The above two references are answered accordingly. There will be no order as to costs.