COMMISSIONER OF INCOME-TAX Vs. PRADEEP J KINARIWALA

JUDGEMENT

(1.) IN this tax appeal, following substantial question of law have been framed.

(2.) RESPONDENT Assessee was a partner in a firm having specified percentage of share in the profit and loss of the partnership firm. A part of share the Assessee assigned in favour of body of individuals("BOI" for short). It is the case of the Assessee that to the extent the share was assigned, the income of the partnership firm would become income of BOI and BOI would therefore, be liable to pay tax and not the Assessee. The Revenue holding belief that assignment was bogus and that in any case Assessee continued to be partner of the firm, to the extent of his share had the liability to pay the tax on entire portion of the partnership income which was alloted to him. Tribunal decided in favour of Revenue. Assessee went before High Court in Reference. High Court allowed such Reference. We may notice that identical issue judged by the High Court in case of Sunil J. Kiiariwala v. CIT,1995 211 ITR 127 was carried before the Supreme Court. The Apex Court in decision in case of Commissioner of Income -tax v. Sunil J. Kinariwala, 2003 259 ITR 10 allowing the Revenue's appeal observed:

(3.) WE may also notice that the issue regarding the validity of assignment by partners in favour of BOI was also considered in context of Wealth Tax Act. Issue also reached Supreme Court and Apex Court in decision in case of Commissioner of Wealth -Tax v. Lov S. Kinariwala, 2003 259 ITR 440 dismissed the Revenue's appeal affirming decision of High Court holding that the creation of body of individuals and assigning of assets was not sham and bogus. The decision of the Apex Court in case of Sunil J. Kinariwala was also noticed in Lov S. Kinariwala. The Apex Court however, distinguished two situations making following observations: