A K SHARFUDDIN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN form and virtually in substance the Rs. 31,000 paid to the assessee by his partner Abbas was compensation for the relinquishment of the rights of a partner which the assessee had. The deed of partnership specially provided that the purchase and sale of scrap metal was the only item of business that the partnership was to undertake. Though the deed of partnership provided that it was only the assessee that was to contribute the capital, it was common ground that the capital was borrowed capital. The entire liability to discharge that loan was taken over by the surviving partner Abbas under the terms of the deed of dissolution. To go back to the point mentioned earlier, the only item of business that the partnership was formed to transact was the purchase and sale of scrap iron. The purchase was effected, but the sale could not be effected, because of a temporary embargo placed upon sales by the Government of INdia.

(2.) WE answer the question in the negative and in favour of the assessee. As the assessee has succeeded he will be entitled to the costs of this reference. Counsel's fee Rs. 250/-.