COMMISSIONER OF INCOME TAX Vs. T FERNANDEZ

JUDGEMENT

(1.) THIS is a reference made under s. 256(2) of the IT Act, 1961, by the Tribunal, Bombay Bench `B', and the following four questions stand referred to us :

(2.) WE are concerned in this reference with a partnership styled as M/s Sylvester & Co. It was between the assessee, Mrs. Fernandez, her deceased husband and her son, and the firm was carrying on business since 1st October, 1947. On 23rd December, 1957, a fresh deed of partnership was executed in which the share of the assessee was 25per cent, that of her husband 25per cent and that of her son 50per cent. The assessee's husband died on 21st April, 1963. However, cls. 15 and 17(b) of the deed of partnership became relevant in the context of his death. Clause 15, which is set out in para. 2 of the statement of the case, inter alia, provided that the death of any partner shall not dissolve the partnership as to the other partners, but his assets were to be divided amongst his legal heirs and representatives. The remaining portions of the said clause and cl. 17(b) indicate the manner in which the needful was to be done.

(3.) IN our opinion, it is unnecessary to discuss in detail all the interesting questions of law which arise from the order of the Tribunal. IN para. 10 of the order of the Tribunal, the Tribunal has dealt with the assessment order, and it has come to the conclusion that the ITO was not competent to include the income of the assessee's husband in the hands of the assessee. This aspect is reflected in question No. 4. At the relevant time the Explanation to be found at the foot of s. 64(1) of the IT Act, 1961, indicated the manner in which the ITO was permitted to reverse the course of conduct adopted for the earlier year. The relevant portion of this Explanation reads as under: