SARAH URS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Bangalore Bench, has referred the following question for the opinion of this court :

(2.) M/s. N. S. Corporation was a partnership firm consisting of 8 partners up to August 4, 1972 on which date one of the partners, Ramachandra Shastry, passed away. There was thus a change in the constitution of the firm and the firm continued with the 7 surviving partners and a deed of partnership was also executed in that behalf. Prior to the death of Ramachandra Shastry as well as subsequently, the partner of the firm were entitled to share the profit and loss equally. The question referred to this court involves the method to be adopted for the allocation of the profits between the partners in the two periods, i.e., prior to and subsequent to, the change in the constitution of the firm.

(3.) ON a further appeal to the Tribunal, it was contended that allocation made was not correct. The Tribunal held that in terms of s. 67 of the Act, the tax payable by the firm had to be deducted from the total income of the firm and in the instant case by making such deduction, the balance amount would be Rs. 3,63,870 and this amount had to be apportioned between the partners provided in the proviso to s. 187(1) of the Act. It observed that there was no necessity for reapportioning the tax between the two periods because even if the tax was deducted from the total income and the net figure was apportioned between the two periods in the ratio, as was determined by the ITO, namely, Rs. 1,51,515 to Rs. 3,28,382, the result would be the same, and dismissed the appeal by the assessee.