B P JAIN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these five tax cases are involved certain common questions of law and, therefore, they have been heard together and are being disposed of by a common judgment. The facts are also common and, except one or two points which arise only in Tax Case No. 15 of 1968, the other points are all identical.

(2.) THE assessee in this case is Shri Bimal Prasad Jain. He had entered into a partnership agreement with his uncle, Harchandmull Jain. THE deed of partnership is dated 1st July, 1945, and is annexure "A" to the statement of the case. THE partnership business consisted of promoting new companies under the Indian Companies Act, to be the managing agents of such companies or of any other company and, in particular, to be the managing agents of Bharat Mining Corporation Ltd. THE duration of the partnership fixed by the deed was 20 years and, oil expiration of the said term, the partnership could be determined by either party giving to the other not less than six months' notice in writing. On the expiration of such notice, the partnership was to stand determined. Unfortunately, before the expiry of the period of 20 years, Harchandmull died on June 14, 1959. THE partnership business, which was carried on under the name and style of H. M. Jain & Co., after the death of Harchandmull, could not be so carried on, as the partnership stood dissolved under Section 42(c) of the Partnership Act, because in the partnership deed there was no term to the contrary. In such a situation, the assessee started a business under the name and style of Jain Industries as its sole proprietor. It may be mentioned here that Harchandmull died leaving behind Srimati Pushpa Devi Jain as his widow and six minor children. Bimal Prasad entered into an agreement with Pushpa Devi on November 19, 1959. A copy of the memorandum of agreement is annexure "B" to the statement of the case. In pursuance of the terms of this agreement, the assessee had to part with four annas share in the income which he got from his business of managing agency carried on under the name and style of Jain Industries. In the accounting year, corresponding to the assessment year 1961-62, on account of the four annas share the assessee paid a sum of Rs. 14,228 to Pushpa Devi out of his total income of Rs. 56,912 from the managing agency commission. In the following accounting year, corresponding to the assessment year 1962-63, the assessee paid a sum of Rs. 16,937, one-fourth share out of his managing agency commission. A question arose whether the sums aforesaid could be deducted from the income of the assessee under any of the relevant provisions of the Indian Income-tax Act, 1922, namely, Section 12A, or Section 10(2)(xv) in respect of the year 1961-62, which was covered by the 1922 Act, or whether the payment made in relation to the assessment year 1962-63 could be allowed under Section 39 or Section 37(1) of the Income-tax Act, 1961, as the law applicable in respect of the said assessment year was the 1961 Act.

(3.) MR. A.K. Sen, learned counsel for the assessee, submitted the following points for our determination :