COMMISSIONER OF INCOME TAX Vs. NEMKUMAR PORWAL

JUDGEMENT

(1.) THE assessment years in question in this reference are 1968 69, 1969 70, 1973 74 and 1974 75. The HUF in this case consisted of Shri Nemkumar Porwal, his five minor sons Sushilkumar, Rakeshkumar, Rajeshkumar, Sunilkumar and Sanjivkumar and his wife, Smt. Chintamani Devi. The HUF represented by Nemkumar was a partner in the firm of M/s P. K. Porwal, Kamptee, having a share income of 70per cent. There was a partial partition among the members of the HUF which is evidenced by a partial partition agreement dated September 7, 1967.

(2.) THIS agreement recites that Nemkumar was a partner in the firm Of M/s Pyarchand Keshrimal Porwal and that the 70per cent share in the profits and losses belonged to the HUF represented by Nemkumar till Diwali ending 1966. It also recites that it has been agreed among the members orally as from November 13, 1966, that the said share and share income is "agreed to be partitioned" among the members of the HUF and each member will have one seventh share, of which each will be the absolute owner as a result of the partial partition and each member will be free to enjoy the same as per his or her own free will as from November 13, 1966. The agreement contains a declaration that the share income from the said firm of M/s Pyarchand Keshrimal Porwal accruing to the share of Nemkumar after November 13, 1966, has ceased to be the joint property and share income of the said family and the respective members have each become the absolute owner of one seventh of the said share income.

(3.) FOR the asst. year 1968 69, the ITO took the view that though there was no HUF subsequent to the date of partition, an AOP had come into existence from that date, as there was common intention on the part of various members of the group to derive income by employing capital for the common benefit of all the members. The share income in the partnership firm was thus assessed in the hands of an AOP consisting of the erstwhile members of the HUF. For the subsequent years 1969 70, 1973 74 and 1974 75 also, the ITO assessed the erstwhile members of the HUF as an AOP.