COMMISSIONER OF WEALTH TAX Vs. FAZALBHOY Y A

JUDGEMENT

(1.) THE following two questions are required to be answered in this reference under S. 256 of the IT Act, 1961, at the instance of the Revenue.

(2.) ASSESSEE Sindhubai filed a return of her income on 5th Aug., 1970 declaring total income of Rs. 55.670. This income was shown to have been received from the house property, other business of rice mill and transport, 1/5th share of income from Balaji Firm out of 1/7th of the share which Vasantrao originally held as Karta of the family. While making assessment of the income for the asst. year 1970 71, the ITO came to the conclusion that the whole of the income from Balaji Firm accruing to Vasantrao in his representative capacity belonged to an unregistered sub partnership firm consisting of himself, his wife and his three minor sons. Consequently, income of four other separated members was clubbed in her income in terms of S. 64 of the IT Act. Appeal carried at the instance of the assessee before AAC was unsuccessful but second appeal before the Tribunal succeeded, holding that agreement did not spell out partnership and consequently clubbing of income under S. 64 of IT Act was set out of place.

(3.) THE principle, the Tribunal did not dispute that under certain given set of circumstances, there can be a valid sub partnership. However, on their terms of the deed in question, a finding was reached that the deed did not spell out an agreement of partnership. Reference was made to the three necessary requisite for formation of partnership namely (1) An agreement for creation of partnership, (2) agreement to share the profits and losses of the business and (3) mutual agency. Relying on certain decisions, it was held that none of the requirements was present in the present case and consequently, the appeal was allowed on that basis and the order of clubbing of income under s.64 was quashed, and allowing an application filed by the CIT, the present reference is made.