COMMISSIONER OF INCOME TAX Vs. MST. SAFIYA BAI

JUDGEMENT

(1.) This appeal by special leave arises out of the judgment of a Division Bench of the High Court Division in Reference Case No. 1 of 1972 under section 66(1) of the Income Tax Act, 1922.

(2.) The brief facts leading lo the appeal are that Teherally Adamjee and Abdul Hussain Sulemanajee were carrying on partnership business under the name and style M/s Rangoon Mill Stores since April 1, 1951 with head office at 128, Jubilee Road, Chittagong. The firm dealt in mill stores, mill machineries, hardware, etc. Taherally Adamjee had 12 annas share and the other partner had 4 annas share. Taherally Adamjee died on July 1, 1957, leaving his wife Safiya Bai, three minor sons Roshan Ali, Mustaq Hussaln and Iqbal Husaain and two minor daughters Khairun-nessa and Sarina. With a view to continuing the existing partnership on March 3l, 1958 a deed was executed between the surviving partner Abul Hussain Sulemanji, Saiya Bai and her five minor children. The deed contained a recital to the effect that whereas on the death of Taherally Adamjee, his legal heirs have been admitted as partners in accordance with the provisions of partnership deed and whereas no normal deed has been drawn up so far, the parties desire to reduce in writing the terms and conditions of the partnership on which they have been workings so far and propose to work in future. Thereafter a supplementary agreement was executed on April 12, 1958 for removing some mistakes in the deed dated March 31, 1958. Abdul Hussain Sulemanjee continued to hold his share of 4 annas in the partnership and the remaining 12 annas share was distributed among the heirs of deceased Taheraliy Adamjee according to the shares fixed by the Muslim Law of Inheritance. The minors were admitted to the benefits of the partnership but they are not responsible for the loss. The firm was assessed in the status of a registered firm for the charge years 1964-65, 1965-66, and 1966-67. The Income Tax Officer included the shares of the five minor children in the mother's personal assessments under section 16(3)(a)(ii) of the Income-tax Act for all these years and the assessments were upheld by the Appellate Assistant Commissioner, on appeal before the Appellate Tribunal orders of assessments were set aside on October 30, 1970, In the judgment it was noticed that the amendment in section 16 (3) of the Income Tax Act which was made in 1965, not being retrospective in operation did not apply to the assessment for the year 1964-65. With regard to the assessments for other two years the Tribunal negatived the contention of the department, primarily, because the minor children had inherited their respective shares in the firm along with their mother nod by voluntary acts but through inheritance as a matter of course. Accordingly, the Tribunal excluded the minors share in the income from the personal assessment of their mother.

(3.) At the instance of the Commissioner of Income-Tax reference under section 66(1) of the Income-tax Act was made to the High Court for decision on the two questions formulated therein which are reproduced below: