QUAMRUNNISA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) BY this reference under S. 256 (1) of the IT Act, 1961, the Tribunal, Indore Bench, has referred the following questions of law to this Court for its opinion. At the instance of the CIT:

(2.) THE material facts giving rise to this reference as set out in the statement of the case, briefly, are as follows : The assessee was a partner in a partnership firm carrying on business in the name and style of Star Agency. On October 29, 1974, the assessee was expelled from the partnership. The assessee challenged that action by commencing legal proceedings in that behalf. Ultimately, the matter was settled between the parties and the assessee was paid a sum of Rs. 70,000 on account of her share in the partnership firm, on the closing date of the relevant accounting year. In the course of the assessment of the assessee for the asst. year 1978 79, the ITO assessed the entire amount of Rs. 70,000 as the income of the assessee for that year on the ground that the said amount represented the assessee's share of profits for the asst. yrs. 1975 76, 1976 77, 1977 78 and 1978 79. The ITO held that as the quantification of the right of the assessee to profits was done during the accounting year relevant to the asst. year 1978 79, the whole amount of Rs. 70,000 was taxable in the asst. year 1978 79. The ITO rejected the contention raised on behalf of the assessee that the said amount received by her was in the nature of a capital receipt. The appeal preferred by the assessee before the AAC was dismissed. On further appeal before the Tribunal, it was held by the Tribunal that part of the amount received by the assessee was in respect of relinquishment of the assessee's right to share the future profits in the firm and, to that extent, it was of a capital nature. The Tribunal further held that part of the amount received by the assessee was attributable to the share of profits that the assessee was entitled to under S. 37 of the Partnership Act and that it would have to be spread over the four years in question. In this view of the matter, the Tribunal remanded the case to the ITO for determining the capital and revenue portions of the amount received by the assessee and for apportionment of the Revenue portion in the four years in question. Aggrieved by the order passed by the Tribunal, the Revenue as well as the assessee sought reference and that is how the aforesaid questions of law have been referred to this Court for its opinion.

(3.) THE Tribunal, however, has not given any finding on the question as to whether the firm Star Agency, of which the assessee was a partner, was or was not dissolved and that if it was dissolved, the date on which it was dissolved. Though the Tribunal has referred to the agreement between the assessee and other partners whereby the disputes between them arising out of expulsion of the assessee from the partnership were settled and the assessee was paid a lump sum, neither the agreement is on record, nor has the Tribunal referred to the terms and conditions of that agreement. In our opinion, the statement of the case submitted by the Tribunal is not sufficient for determing the question referred to this Court and learned counsel for the parties agree that the Tribunal should be directed to send a supplementary statement of the case.