SHAPURJI PALLONJI Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act, and the question referred to us is this: Whether, on the facts found by the Tribunal in this case, the Income-tax Officer is by reason of the registration under Section 26A of the instrument of partnership dated November 15, 1937, prevented or estopped from taxing in the hands of the assessee profits representing the share of ten annas and eight pies in full?

(2.) THE applicant and his brother, Mr. P. P. Mistry, were partners in a firm of building contractors under a partnership, dated September 24, 1929. On November 15, 1937, they and the applicant's son entered into a deed of that date. An examination of the deed shows that it contained a recital which states: And Whereas from the 15th day of November 1937 the parties of the first and second parts took the party of the third part as a partner in the said business and whereas the parties are desirous of recording by these presents the constitution of the firm. . . . THEn there are set out various rights and duties of partners, and finally the shares of the partners in the profits and losses of the business, which shows the applicant as being entitled to 6-2/3 annas share, his brother P. P. Mistry to 5-1/3 annas share, and his son Kaikhushroo to four annas share.

(3.) NOW, the facts as found by the Appellate Tribunal may be very shortly stated, and they are as follows: In view of these considerations, we find that K. S. Mistry was nothing but a name-lender and that the entire profits representing the share of Rs. 0-10-8 belonged, in fact, to S. P. Mistry and were rightly included in his total income by the Income-tax Officer. So that, the position is this : that, although the firm or the instrument of partnership has been registered, and although on the face of the instrument of partnership it appears that the applicant's son has a four annas share, the facts as found by the Appellate Tribunal are that he was merely a name-lender and that that four annas share belonged to the applicant'