INDIRA DEVI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE facts, as stated by the Tribunal in this case, are as follows : THE assessee was an individual and being a partner in Messrs Durga Flour Mills, Calcutta, was having a share of 18 paise. On October 15, 1971, she executed a deed of settlement by which she settled a 6 paise share, out of the 18 paise share, in favour of a minor, Navin Kumar, son of her brother-in-law, Shri Pawankumar. THE assessee filed a return for the assessment years 1972-73 to 1975-76, claiming that the income attributable to 6 paise share had been diverted by overriding title to a minor Navin, and should, therefore, be excluded from the estimated total income It is stated that she had also filed the settlement deed along with the returns. THE Income-tax Officer, in the original assessment, excluded the share of the minor from the total income of the assessee for all the three assessment years. Subsequently, the internal audit party of the Income-tax Department gave a note, which is as follows :

(2.) THEREUPON, the Income-tax Officer made a reassessment under section 147(b) by which he concluded that there was no diversion by overriding title of the 6 paise share, out of the 18 paise share of the assessee, and completed the assessment including the entire 18 paise share of the assessee. This action was confirmed both by the Appellate Assistant Commissioner and the Appellate Tribunal. The assessee had objected to the reopening of the assessment on the ground that the audit party has given a legal opinion, which it was not entitled to do and, therefore, it did not constitute information within the meaning of section 147(b) to grant jurisdiction to the Income-tax Officer to reopen the assessment. On the merits also, the assessee had objected that the settlement amounted to a transfer of title with regard to 6 paise share in the firm. The Appellate Tribunal rejected both the objections. This has led to the reference of the following questions :

(3.) THIS takes us on to the merits of the case. The settlement deed itself provides that the minor will have a right to claim a 6 paise share only from the assessee and not from the firm. As pointed out by the Supreme Court in K A. Ramachar v. CIT [1961] 42 ITR 25, the tenor of the deed of settlement shows that the profits were first to accrue to the assessee and then applied for payment to the donee. It is only the partner, who is entitled to the profits and the donee, as an assessee (? ) did not have and could not have any direct link to the profits. It follows that there was no transfer of the interest in the firm itself and hence the 6 paise share of income of the assessee was not diverted by overriding title. The case of conversion of individual property into joint family property is distinguishable as it is not considered to be a transfer as such. The facts of this case are on all fours with the decision of the Supreme Court, cited above, and hence the finding of the Appellate Tribunal that there was no diversion of income of the assessee in the 6 paise share in the firm by overriding title to the minor is correct.