PANNABAI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The question that arises for our determination is whether the share income derived by the assessee from a partnership firm can be taxed fully in her hands as representing a body of persons or only 1/7th of the share income which represents her share alone in the share income.

(2.) The relevant facts are these : One Karodimal was a partner in the firm of M/s. Mysore Khandasari Sugar Mills, Mukthiargunj, Hyderabad. He had 30% share in that firm. He died intestate on 16/05/1968, leaving behind him his wife and six minor children. His wife, Smt. Pannabai, the assessee herein, entered into a partnership agreement with the other partners to continue the business of the firm and she was allotted the same 30% share which her husband held in that firm. Some other changes were also made in the constitution of the firm and that is evidenced by a new partnership deed dated 24/05/1968. In the deed, it was mentioned that, after the death of Karodimal, it was decided to continue the business of the firm and that is how the fresh partnership deed came to be executed. For the assessment year 1970-71 with which we are concerned, the share income from that partnership had to be determined. She admitted 1/7th of her share in the firm on the ground that, after the death of her husband, she stepped into his shoes as a partner in the firm and, therefore, she represents her six minor children also, since all of them are the legal heirs of her deceased husband. It was also stated that the entire capital standing in the name of her husband has been left in the firm as capital in her name and that all the seven of them are entitled to 1/7th share each. It is on that ground she claimed that what was assessable in her hands was only 1/7th of the share arising from the firm. The ITO negatived her claim and assessed the entire share income in her hands treating it as income of the assessee. She then preferred an appeal and the AAC dismissed the appeal agreeing with the findings of the ITO. Then she preferred a further appeal to the Tribunal and the Tribunal, while confirming the order of the AAC, however, made the following modification :

(3.) In so holding that the status of the assessee would be that of a body of individuals, the Tribunal followed the decision of this court in Deccan Wine and General Stores v. CIT [1977] 106 ITR 111. At the instance of the assessee, the following question was referred to this court for our opinion :