COMMISSIONER OF INCOME TAX Vs. GANDHI R D

JUDGEMENT

(1.) THIS IT reference relates to the asst. years 1972 73 and 1973 74. The assessee, who is a Hindu individual, was a partner in the firm of M/s Rasiklal D. Gandhi & Co. in his individual capacity, holding 25% share in the partnership. On 28th Dec., 1970 the assessee made a declaration that as on 2nd Nov., 1970 he had thrown into the common pool of his HUF consisting of himself, his wife and his four sons, a sum of Rs. 1,60.,000 out of his capital in the firm of M/s Rasiklal D. Gandhi & Co., as also his share in the partnership. It was also declared that this amount of Rs. 1,60,000 as also his share in the partnership business was his self acquired property. This was accepted by the ITO. We are not going into the exact findings of the ITO. The CIT, however, passed an order under s. 263 of the IT Act, holding that since a share in the partnership was likely to place some liability on the joint family, such an asset cannot be impressed with the character of joint family property. He, therefore, held the declaration as invalid. The assessee appealed against the order of CIT to the Tribunal. The Tribunal held that the interest of a partner in a partnership is an asset and there is nothing to prevent a coparcener from impressing such an asset with the character of joint family property.

(2.) FROM this finding, the following question has been referred to us under S. 256(1) of the IT Act, 1961 :

(3.) IN view of this position in law, in our view, the Tribunal was right in holding that the share in the partnership was an asset which could be thrown into common stock of joint family property. The question, therefore, is answered in the affirmative and in favour of the assessee. No order as to costs.