COMMISSIONER OF INCOME-TAX Vs. NARINDER KUMAR

JUDGEMENT

(1.) NARINDER Kumar, an assessee in his capacity as karta of a Hindu undivided family consisting of himself, his wife and a minor son, was a partner in two firms. On March 31, 1973, a partial partition of the Hindu undivided family was effected whereby the shares in the two firms were divided equally between the assessee, his wife and minor son. The Income-tax Officer accepted the partial partition of the Hindu undivided family. For the assessment years 1974-75 and 1975-76, while faking up the case of the assessee, the Income-tax Officer included the share income of the wife arid the minor son in the income of the assessee received from the two firms in which the assessee was a partner in his capacity as karta of the Hindu undivided family in view of the provisions of Section 64 read with Section 183 (b) of the Income-tax Act, 1961 (hereinafter called "the Act"), on the ground that the partial partition deed provided that the assessee was to receive all profits of the two partnership firms and thereafter the same were to be divided between them in equal shares. This, according to the Income tax Officer, amounted to the creation of a sub-partnership. On appeal, the Appellate Assistant Commissioner considered another clause of the partial partition deed whereby an overriding title, regarding the shares of the minor and the wife, was created on the assessee as he had undertaken to be liable to account for all profits that he may receive from the two partnership' firms to his wife and son and gave relief to the assessee. The Tribunal agreed with the Appellate Assistant Commissioner and at the instance of the Revenue, the following two ques tions have been referred for the opinion of this court:

(2.) ON behalf of the Revenue, reliance has been placed on the decision of the Gujarat High Court in CIT v. Mahendrasingh Mohansingh [1980] 123 ITR 938 whereas counsel for the assessee has placed reliance on CIT v. Ram Narain [ 1980] 126 ITR 267 (P and H), a decision of our court and CIT v. Pabbati Shankaraiah [1984] 145 ITR 702 of the Andhra Pradesh High Court.

(3.) AFTER considering the provisions of the Act and the above cited judgments, we are of the opinion that Mahendra Singh's case [ 1980] 123 ITR 938 (Guj) and Ram Narain's case [1980] 126 ITR 267 (P and H) are distinguishable on facts and the facts of the present case are closer to Pabbati Shankaraiah's case [1984] 145 ITR 702 (AP), as in that case also there was a clause creating an overriding obligation on the karta to make over the income of the other members of the family with whom a partial partition had been effected and it was held that the share of each such member from the inception accrued to them, creating thereby a superior right in their favour and was thus not assessable in the hands of the father who was the karta. No such point arose for consideration in the other two aforesaid cases and hence they are distinguished.