S.A.SHAH,J. - (1.) THIS reference arises at the instance of the Revenue for our opinion. The questions of law that arise out of the order dated January 24, 1978, of the Tribunal, Ahmedabad Bench "A" (hereinafter referred to as "the Tribunal"), are as under: "(1) Whether, on the facts and circumstances of the case, the Tribunal was right in law in holding that: (i) the assessee's interest in the partnership firm styled M/s Public Construction Company; and (ii) the amount of Rs. 5,000 standing in the said firm's books to the assessee's credit as accumulated profit stood converted into joint property of the HUF headed by the assessee as Karta ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that conversion of the said properties into joint property of the HUF did not involve a transfer within the meaning of S. 60 r/w S. 63(b) of the IT Act? (3) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that only a portion (namely, 1/7th portion) of the share income earned by the partner, Rajendra P. Bhow, from the said firm was includible in the computation of the assessee's individual total income ? "
(2.) IN order to appreciate the contentions raised by the Revenue, short facts are required to be stated. The year concerned is the assessment year 1973 74. The assessee, Shri Rajendra P. Bhow, is an individual. The previous year is Samvat year 2028 the period from October 28, 1971, to November 6, 1972. The assessee's share in the profit and loss of the partnership firm styled as M/s Public Construction Company was 15 naye paise. He also had in the said firm some amount lying to his credit, that amount being accumulated profits and the interest thereon. On October 20, 1972, the assessee made a declaration throwing his interest in the said partnership firm into the common stock of the HUF and also the amount of Rs. 5,000 out of the accumulated profits as aforesaid. In the return of total income furnished by the assessee, he included only 1/7th portion of the share income earned by him during the previous year under consideration. The ITO, however, included the entire share income amounting to Rs. 8,812 in the assessment which was completed on October 23, 1975. The ITO took the view that a partner's interest in a partnership firm is not always beneficial inasmuch as sometimes the partnership firm may be running into losses, and that under Hindu law it is not open to a coparcener to blend his separate property which is of an onerous character. Further, the ITO held that even if blending purported to be effected in the assessee's case is valid under Hindu law, S. 60 of the IT Act would come into play, inasmuch as the assets giving rise to the share income did not stand transferred to the HUF in whose favour the overriding title was intended to be credited. Copy of the declaration dated October 20, 1972, is annexure "A", and copy of the ITO's order is annexure "B" to this reference. Being aggrieved by the said order of the ITO, the assessee took the matter in appeal to the learned AAC, where he urged that the HUF consisted of his father, mother and five major brothers (including himself) and his interest was only 1/7th portion which was taxable in the assessment of the assessee as an individual. The AAC accepted the contention of the assessee and directed the ITO to exclude 6/7ths portion of the share income from the computation of the assessee individual's total income.
(3.) IN the appeal before the Tribunal filed by the Revenue, the Tribunal agreed with the view taken by the AAC and held that the entire interest in the firm had been thrown into the common stock of the HUF, relying upon the decision of this Court in Addl. CIT V. Chandulal C. Shah 1976 CTR (Guj) 299 : (1977) 107 ITR 91. With regard to the question of applicability of the provisions of S. 63(b) of the IT Act, the Tribunal rejected the argument by stating that the revocability of a transfer is to be traced in the very terms of the transfer and not anywhere else outside the transfer. With regard to the question under S. 60 of the IT Act, the Tribunal held that in the instant case, it cannot be said that the transaction comprised in the coparcener's act of throwing his separate property into the common stock of the HUF involved a bilateral transaction as such. It is well settled that such act of impressing a coparcener's separate property with the character of coparcenary property is not tantamount to a transfer in the general sense. In view of its finding as aforesaid, the Tribunal dismissed the appeal. Hence, this reference.;