TERLA VEERAIAH Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE following question has been referred to this Court by the Tribunal under S. 256(1) of the IT Act at the instance of the assessee :

(2.) THE facts giving rise to this reference are these : The assessee is one M/s Terla Veeraiah and the assessment year is 1972 73. There was an HUF of which Terla Parasuramulu, the father of Terla Veeraiah, was the Karta. The HUF was carrying on wholesale business in cloth. There was a partition between Terla Parasuramulu, his son, Terla Veeraiah, and his grandson, Terla Srisailam. After partition, the three divided members constituted themselves into a partnership firm by a deed dated December 12, 1962. Parasuramulu died on January 9, 1969. The partnership continued even after his death. Parasuramulu did not leave any other person except his son, Veeraiah, as his heir. He, therefore, succeeded to Parasuramulu's properties including the capital standing to his credit in the firm. Veeraiah was being assessed as an HUF in respect of the share income from the partnership firm. The account standing in the name of Parasuramulu and inherited by his son Veeraiah was put in a separate account. So far as the account as partner of the firm was concerned, it was styled as "Terla Veeraiah (HUF) account" For the asst. years 1970 71 and 1971 72, a sum of Rs. 7,890 being the interest received from the partnership was credited to the account described as "Terla Veeraiah Individual Account" An amount of Rs. 8,585 received in respect of the same assessment years was credited to the account styled as "Terla Veeraiah (HUF) Account" So far as the interest received in respect of the individual account was concerned it was being assessed in the hands of Terla Veeraiah in the status of an individual as distinct from the assessment of HUF of Terla Veeraiah.

(3.) MR . Anjaneyulu, the learned counsel appearing for the assessee, invited our attention to the findings of the Tribunal to contend that on those findings the Tribunal was in error in holding that s. 40(b) comes into operation. Sec. 40(b) of the IT Act says :