COMMISSIONER OF INCOME TAX Vs. KANCHANLAL L TALSANIA

JUDGEMENT

(1.) THIS is a reference under S. 256(1) of the IT Act, 1961, by the Tribunal, Bombay Bench "A", at the instance of the CIT, referring to us the following question for our opinion :

(2.) THE assessee who is an attorney and an advocate of this Court, was a partner in the firm of M/s Bhaishanker Kanga and Girdharlal, attorneysat law, from 1st March, 1961, till 31st May, 1968, under a deed of partnership dated 25th April, 1961, varied from time to time, the last of such variation being made on 16th March, 1968. He retired from the firm on 31st March, 1968. The accounts of the firm were maintained on cash or receipt basis, its accounting year being the calendar year from 1st January to 31st December.

(3.) ON 17th December, 1970, the assessee executed an indenture of settlement under which, out of love and affection, he irrevocably settled his right of recovery of outstandings from 1st March, 1961 to 31st May, 1968, from M/s Bhaishanker Kanga and Girdharlal in favour of his two sons, Dinesh and Rohit. The recital in the said deed of settlement expressly, inter alia, stated that during the period from 1st March, 1961, to 31st May, 1968, when the assessee was a partner in the said firm, he was entitled to receive, recover and realise from the said firm his share of outstandings according to the deed of partnership dated 25th April, 1961, as varied subsequently, and it was this right of his which he had irrevocably settled on his two sons for their benefit. Clause 2 of the said indenture of settlement specifically provided that the trustees were to receive, recover and realise the trust property from the said firm every year and to utilise in the manner set out in the said indenture of transfer. A copy of the said indenture was endorsed by the assessee to the said firm.