COMMISSIONER OF INCOME TAX Vs. DELHI PRINTING WORKS

JUDGEMENT

(1.) THIS is a reference under S. 66(2) of Indian IT Act, 1922, which arose out of the assessment of Shambhu Nath, proprietor of Delhi Printing Works, for the asst. year 1961 -62 for which the previous year was the calender year 1960. The question which has been referred for our decision is : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to a deduction of Rs. 20,182 out of the sum of Rs. 40,000 paid by him to Shri Sham Nath in computing the assessee's total income -

(2.) THE assessee, Shambhu Nath and his son, Sham Nath, were running and managing the Delhi Printing Works which originally belonged to one Chandu Lal and which was being run from 1st April, 1939. In 1952 the assessee and his son purchased the business and started running it as a partnership concern w.e.f 1st Jan., 1953. A partnership deed was drawn up on 12th Sept., 1953. The father was entitled to 2/3rds share in the profits and the son 1/3rd share. Under the terms of the partnership deed it was not terminable before the expiry of five years from the date of its commencement but under cl. 15 after the expiry of five years either of the partners could retire after serving three months' notice of his intention to the other partner. During the said period of three months the accounts were to be finalised and the retiring partner shall be deemed to have ceased as a partner although some matters might remain unsettled during that period. Under cl. (4) of the partnership deed the cash required for running the business was to be contributed by each partner according to his own share and if any partner advanced more than his share, he was entitled to interest at 6%.

(3.) IN 1958 disputes and differences arose between the assessee and his son. On 15th Oct., 1958, the son served a notice on the father stating that he did not intend to continue as a partner in the business and giving three months' notice for the termination of the partnership. He also gave a number of reasons for his decision. He also laid a claim to several sums of money as due to him on the termination of the partnership. He claimed a sum of Rs. 30,000 together with interest on account of excess drawings made by the father from the firm. He also claimed that the income -tax of the partners had been erroneously paid out of the partnership funds and that in respect of this also he had a claim. He further claimed that a sum of Rs. 35,811 -7 -6 was due to him as per his account with the firm. He also mentioned another sum of Rs. 3,500 as due to him on account of certain expenses incurred by him on account of the firm.