COMMISSIONER OF INCOME TAX Vs. MINALBEN S PARIKH

JUDGEMENT

(1.) AT the instance of the CIT, Gujarat State III, Ahmedabad, the Tribunal, Ahmedabad has referred the following question of law arising out of his judgment :

(2.) THE husband of respondent assessee namely Shri Kumudchandra Chimanlal was partner in a firm M/s. Atmaram Maneklal & Sons. He had 1/6th share in profits as well as in losses. Under cl. 10 of the deed of partnership dt. 16th Feb., 1970, it was provided that on death or retirement of any partner or on admission of a new partner, the firm shall not be dissolved. Said Kumudchandra expired on 19th Oct., 1973 leaving behind his widow Minalaben and three minor children. Smt. Minalben was inducted as partner in the said firm. In the deed of partnership dt. 23rd Oct., 1973, it was stated she is being inducted in place of Kumudchandra and her share was same as of her late husband namely 1/6th share. According to a declaration made by Smt. Minalben on 9th Nov., 1973, three children were declared to be entitled to have right in the share from firm M/s. Atmaram Maneklal & Sons in equal ratio as she and her three children were entitled to share the estate of late Shri Kumudchandra each having 1/4th share therein. As the partners were prepared to take only one of them as a partner in place of late Shri Kumudchandra, only Smt. Minal Devi was inducted in the firm as a partner. Smt. Minalben disclosed 1/4th of 1/6th profit from the said firm in her income. The three minor children who were being separately assessed also included 1/4th of 1/6th profit of the firm falling to the share of Smt. Minalben in their respective returns. The assessment of the applicant as well as three minor children were accordingly completed on that basis. The CIT in exercise of powers under S. 263 of the IT Act, 1961 (hereinafter referred to as the "Act"), set aside the order of the ITO in the case of Smt. Minalben and directed him to pass fresh order in accordance with law. He was of the opinion that the order passed by the ITO bringing to tax only 1/4th of the share in the hands of Smt. Minalben was, therefore, erroneous and prejudicial to the interest of Revenue.

(3.) THE learned counsel for the Revenue urged that the Tribunal having found that the order passed by the ITO including only 25% of the share received from the firm M/s. Atmaram Maneklal & Co. in the assessment of Smt. Minalben was erroneous, it was not justified in quashing the order of the ITO (sic CIT) on the ground that it would result in double taxation.