SULOCHANA DEVI NATHANI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Tribunal, "A" Bench, Patna, has referred the following questions of law for decision of this Court :

(2.) THE respondent is the Revenue. We are concerned with the asst. year 1972 -73. The accounting period ended on 31st Dec., 1971. The assessee was a two annas partner in the firm, West Bengal Mining Co.. She executed a trust deed dt. 23rd March, 1971, settling Rs. 4,01,000 out of her capital standing in the firm on the trust. In the year, 1971, it was decided that there should be a sub -partnership between Smt. Sulochana Devi Nathani and the trust by which two annas share in the firm was to be shared by herself and the trust. The ITO included the entire two annas profit of West Bengal Mining Co. in the assessment of Smt. Sulochana Devi Nathani. The assessee claimed that only 50% of the share should be included in her hand and the other 50% was the income of the trust. This plea was rejected. In appeal, the AAC held that the sub -partnership was in existence in November, 1971, though the partnership deed was executed on 31st Dec., 1971. It was further found that after the said date half of the share was diverted at source and belonged to the trust. He directed that the profit arising after the end of November, 1971, should be governed by the sub -partnership, and the profit prior to that was properly assessable in the hands of Smt. Sulochana Devi Nathani. He also directed that the income arising after the end of November, 1971, was to be included only to the extent of 50 per cent in the hands of the assessee and the balance was, therefore, excluded. In appeal, the Tribunal affirmed this decision. It is, thereafter at the instance of the assessee that the questions of law formulated hereinabove have been referred to this Court for decision.

(3.) THE AAC has found in the assessment relating to the firm and the registration thereof that Smt. Sulochana Devi Nathani was the full -fledged owner of her share in the firm upto 26th Nov., 1971, and till 26th Nov., 1971, whatever be the income earned, was earned in her individual capacity and if she relinquished her rights to the extent of 50% in it, that would amount to application of income and the total income earned till that date was liable to be taxed in her hand. After the said date, the income receivable by Smt. Sulochana Devi Nathani from the firm became the income of the sub -partnership and she was liable to be assessed only on her share income from the sub - partnership. This finding in the case of the assessment of the firm categorically shows that two annas share in West Bengal Mining Co. accrued to Sulochana Devi Nathani and was receivable by her for the period upto November, 1971. It is only subsequent to the said period that the trust became entitled to the income of the West Bengal Mining Co. and the total income earned till November, 1971, from the said firm accrued to only Smt. Sulochana Devi Nathani. It is only after that date that the income receivable from the West Bengal Mining Company becomes the income of the sub -partnership and Smt. Nathani would be assessed only on the share income of the said partnership. In the light of the above finding, it is not open to one of the partners of the firm Smt. Sulochana Devi Nathani to contend at this later stage that 50% was the share income received from the firm which arose from any date antecedent to November, 1971. The Tribunal was justified in holding that the income of Smt. Sulochana Devi Nathani would be governed by the sub - partnership, which came into existence at the end of Nov., 1971, and there was no diversion of 50% share income of the said firm at source from the beginning of the year, 1971. We answer, question No. 1, referred to this Court, in the affirmative, against the assessee and in favour of the Revenue. We answer question No. 2, referred to this Court, also in the affirmative against the assessee and in favour of the Revenue. The reference is answered as above.