COMMISSIONER OF INCOME TAX Vs. K N NARAYAN

JUDGEMENT

(1.) This is a reference under Section 256(1) of the INCOME TAX ACT, 1961, 1961 at the instance of the revenue. The following question has been referred by the Income-tax Appellate Tribunal, Bangalore Bench, for the opinion of this Court:

(2.) K.N. Narayan was a partner in two firms, viz., M/s. Vidyut Equipment Company and M/s. Bharat Enterprises (Mysore). By a declaration dated July 16, 1969 he declared that his partnership interest in the said firms should be the joint family property and he has also thrown in to the hotch-pot his personal property with which we are not concerned.

(3.) For the assessment year 1971-72 the share income from the partnership firms was not assessed in the hands of the individual - K.N. Narayan. The Commissioner in exercise of his revisional jurisdiction set aside the assessment order and directed the I.T.O. to re-do the assessment by ignoring the declaration. According to the Commissioner under the Hindu Law one cannot make a declaration whereby the joint family has to bear the risk and liability of the business and therefore he has held that the declaration made by the assessce has to be ignored altogether. Being aggrieved by the order of the Commissioner, the assessee preferred an appeal before the Tribunal. The Tribunal allowed the appeal and reversed the order of the Commissioner. It has followed the decision of the Income-tax Appellate Tribunal 'C' Bench, Madras, in I.T.A. No. 547 (mds) of 75-76 (I.T.O. vs. P. Muthuramakrishnan, Karur) and held that throwing of the property consisting of the interest in a partnership firm into the common hotch-pot of the HUF would be valid and such a declaration cannot be ignored by the I.T.O.