COMMISSIONER OF INCOME TAX Vs. PARMANAND BHAI PATEL

JUDGEMENT

(1.) THIS reference made under Section 66 (1) of the Income-tax Act, 1922, is to answer the following question:--

(2.) THE relevant facts are these : THE assessment year is 1960-61. A registered partnership firm M/s. Mohanlal Har-govinddas of Jabalpur had only two partners, namely, Smt. Jadaobai .and Smt. Ujjambai, during the relevant period. THE Income-tax Officer while assessing the income of Smt. Jadaobai and Smt. Ujjambai for the assessment year 1960-61 had not charged special surcharge amounting to Rs. 32,400 in each case on the share of income-tax paid by the registered firm falling to the share of the assessee. THE Commissioner of Income-tax treating it as an omission prejudicial to the interest of revenue initiated action under Section 33-B of the Income-tax Act, 1922, and ultimately directed the Income-tax Officer to revise the order of assessment in the case of each partner by including the special surcharge of Rs 32,400 in accordance with the Finance Act, 1960 (Act No. 13 of 1960). On behalf of the assessee it had been contended that the exemption granted to a partner under Section 14 (2) (aa) of the Income-tax Act, 1922, could not be treated as unearned income, the same being earned income of the partner, as a result of which no special surcharge was leviable according to the Finance Act, 1960. THE Commissioner rejected the objection taking the view that the definition of 'earned income' contained in Section 2 (6AA) of the Act read along with the other relevant provisions including Sub-Section (6) of Section 2 of the Finance Act, 1960, clearly excluded from within the ambit of earned income, such income as is exempted from tax under Sub-Section (2) of Section 14. It was held that the amount was an item of unearned income in the hands of each partner, the same being obviously included within the "total income" as defined in the Income-tax Act, 1922.

(3.) IT is obvious that in making the additional statement of case, the Tribunal has totally missed the point. From the above facts stated in the initial statement of case itself, it is obvious that the real controversy between the parties throughout has been whether this amount in the hands of each partner was the partner's "earned income" as contended by the assessee or "unearned income" as contended by the revenue. This being the only real controversy, it is difficult to appreciate the additional statement of case saying that there was no dispute between the parties on this point. Shri K. A. Chitale, learned counsel for the assessee, stated before us that it was for us to decide the nature and character of the amount since the High Court's opinion was sought on that point and what was stated in the statement of case could be taken only as the Tribunal's opinion about its nature. This was his stand particularly in view of the arguments advanced by him which are mentioned hereafter since the consideration of those arguments itself requires a decision about the nature of this amount. The stand taken by Shri P. S. Khirwadkar, counsel for the revenue, was the same. The additional statement of case is, therefore, of no further assistance except to the extent of showing that in the Tribunal's view this amount was "earned income" in the hands of each partner. IT may be mentioned that both the original partners Smt. Jadaobai and Smt. Ujjam-bai having died, they are now represented by their legal representatives.