COMMISSIONER OF INCOME TAX Vs. BHUTA V G

JUDGEMENT

(1.) BY this reference under s. 256(1) of the IT Act, 1961, the Tribunal has referred the following question of law at the instance of the Revenue :

(2.) THE reference relates to asst. yr. 1971-72. THE assessee is an individual and an architect by profession. He was carrying on his profession in partnership with his father Shri G.M. Bhuta and one Shri M.K. Talpade as partners under the name and style of M/s G.M. Bhuta & Associates. Clause 6 of the partnership deed provides that the name and goodwill of the business would belong to Shri G.M. Bhuta absolutely. Clause 18 further provided that the firm would not stand dissolved on the death of a partner but the surviving partner or partners would succeed to the shares of the deceased partner in the partnership business including assets and effects and would undertake all the debts, liabilities and obligations of the partnership in the proportion in which they held their respective shares. This clause also required the surviving partners to pay to the legal representative of the deceased partner as the price of such share the following amounts :

(3.) SHRI G.M. Bhuta died on 5th Sept., 1963 and on his death the partnership was continued by the remaining two partners, viz., V.G. Bhuta and Talpade. A fresh partnership deed was drawn up on 31st March, 1964 effective from the date of death of SHRI G.M. Bhuta, that is, 5th Sept., 1963. Clause 15 of the new partnership agreement provided that, in the event of the death or retirement of Talpade, the goodwill of the business shall belong to the remaining partner SHRI V.G. Bhuta. It further provided that in the event of death or retirement of Talpade, SHRI V.G. Bhuta would pay to his heirs or to him as price of his share, the following amounts :