COMMISSIONER OF INCOME TAX Vs. A RADHAKRISHNAN

JUDGEMENT

(1.) PURSUANT to the orders of this Court dated 24. 8. 1998, the income Tax Appellate Tribunal,'b'Bench, Madras has made a statement of case to this Court by raising the following question of law for our answer: "whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law and had valid materials in holding that the assessee had transferred only the lodging business to the trust and hence the transfer is not hit by the provisions of Section 60, even though the property with which the lodging business was done has not been transferred by the assessee to the Trust""

(2.) THE assessee , an individual, is the owner of a building situated at No. 5a (Old No. 6), Lakshmikanthan Street, Thyagaraja Nagar , Madras. THE building comprises of 40/41 single cot residential rooms and 40/41 double cot residential rooms with other facilities. For the assessment year 1988-89 and 1989-90, the assessee made a claim before the assessing Officer to the effect that by a gift deed dated 18. 6. 1986, he had gifted the income from the said mansions to one "m/s. Poong a Educational and Charitable Trust" and hence, no part of the income from the said mansions was chargeable to tax in his hands. THE claim of the assessee has been negatived by the Assessing Officer by referring Section 60 of the Income Tax Act and brought to tax in the hands of the assessee the income from the said mansions for the two assessment years referred to above.

(3.) THE other decision of the Supreme Court, relied on by the learned counsel for the revenue, is one rendered in the case of commissioner OF INCOME TAX v. SUNIL J. KINARIWALA, referred supra. That was a case in which the Supreme Court reversed the decision of the High Court holding that there was a clear distinction between a case where a partner of a firm assigns his hare in favour of a third person and a case where a partner constitutes a sub-partnership with his share in the main partnership. Whereas, in the former case, in view of Section 29 (1) of the indian Partnership Act, 1932, the assignee gets no right or interest in the main partnership, except of course, to receive that part of the profits of the firm referable to the assignment and to the assets in the event of dissolution of the firm, in the latter case, the sub-partnership acquires a special interest in the main partnership. Though, in view of Section 29 (1) of the partnership Act, the trust, as an assignee, became entitled to receive the assigned share of the profits from the firm, it received the share of profits not as a sub-partner, because no sub-partnership came into existence, but as an assignee of the share of income of the assignor-partner. THEre was no diversion of income by overriding title. THE share of the income of the assesse e assigned to the trust had to be included in the income of the assesse e.