INDUBAI MANOHARLAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) UNDER section 256(1) of the Income-tax Act, 1961, the Tribunal has referred the following common question in these two reference :

(2.) THE assessee appealed and succeeded. THE Commissioner of Incoem-tax (Appeals) found from the partnership deed that from October 1, 1975, the said two minors had ceased to be partners for the benefits of the partnership and what they were entitled to when the books were closed on March 31, 1976, was not by the terms of partnership deed but by a separate agreemetnt. Accordingly, he held that the additons cannot be sustained and allowed the appeal of the assessee.

(3.) IT is not in dispute that the minors were admitted to the benefits of the partnership and they received the share income from the period up to their continuance in that partnership. Section 64(1) of the Act directs that in computing the total income of any individual, the income arising directly or indirectly to a minor to the benefits of partnership in a firm shall be included in computing the total income of that individual. IT is immaterial whether the share income was received by the minors on the date on which they discontinued as partners or on the date when the books of account were closed. So long as it is not in dispute that what they received was the share of profit which they were legitimately entitled to as minors admitted to the benefits of the partnership, the operation of section 64(1)(iii) cannot be excluded. There is, therefore, no scope for exclusion of their share income in computing the total income of the assessee.