Decided on October 11,1962

Cursetji J Dubash Appellant

Cited Judgements :-



TAMBE, AG.C.J. - (1.)THIS is a reference under sub -section (1) of section 66 of the Indian Income -tax Act. The facts leading to this reference in brief are :
(2.)MRS . Katie, wife of the assessee and mother of Gulu, was the lessee of the cinema theatre known as 'Kasturba Talkies' situate at Malad, a suburb in the City of Bombay. On 31st July, 1951, she entered into an agreement with one Pirojsha Rustomji Irani, for the running of the said theatre on certain terms and conditions as mentioned in the deed, annexure 'A' to the statement of the case. This agreement was treated as an instrument of partnership between herself and P. R. Irani. She died intestate on 1st February, 1957, and according to the personal law governing her, her heirs were her husband, the assessee before us, and her minor daughter, Gulu. A new agreement for the running of the theatre 'Kasturba Talkies' was entered into between C.J. Dubash, the assessee before us, acting for himself and as father and natural guardian of the minor daughter, Gulu, on the one hand, and P. R. Irani and S. P. Irani, on the other, on certain terms and conditions, as mentioned in the deed of 27th March, 1957, annexed to the statement of the case as annexure 'B'. An application for renewal of registration under section 26A was made. It was signed by the assessee for himself and for Gulu. In the relevant assessment year, 1958 -59, with which we are here concerned, the Income -tax Officer rejected this application for renewal of registration on the ground that this new firm had not been granted registration at any time before and as such the question of granting renewal does not arise. The assessment of the firm was made under section 23(3) read with section 23(5) (b), and the total income of the firm was allocated amongst the partners as shown in annexure 'F'. It appears that no appeal has been filed against the assessment order of the firm determining the amount of total income or its allocation amongst the partners under section 23(5) (b). The assessment order which is annexure 'D' to the statement of the case shows that Gulu, the minor daughter of the assessee, was shown as a partner in the firm.
Now, the assessment order in the individual case of the assessee is not on record. But a copy thereof has been filed before us by the counsel for the assessee, and no objection thereto was raises. This copy of the assessment order in the case of the assessee shows that to his other income has been added Rs. 9,000 as his share of income in the firm, and also in his income is added Rs. 11,000 as his (assessee's) minor daughter's share under section 16(3) subject to rectification pending intimation. The assessment order in the assessee's case was made on 23rd February, 1959, while the assessment order of the firm was made on 28th June, 1959. As the assessment of the firm was after the assessment of the individual case of the assessee, it appears that the inclusion of the minor daughter's income under section 16(3) was subject to rectification pending intimation. Now, the reference with which we are concerned arises out of the individual assessment of the assessee. As already stated, in the assessment of the assessee, the share of his minor daughter, Gulu, in the cinema theatre, 'Kasturba Talkies', has been added under section 16(3) to his income. Against this assessment order, the assessee appealed and contended that the share income of his minor daughter could not be included in his income under section 16(3) of the Act. The appeal before the Appellate Assistant Commissioner failed. The assessee took a further appeal to the Tribunal, and before the Tribunal the assessee again objected to the inclusion under section 16(3) (a) (ii) of the sum of Rs. 11,000 in his income. Before the Tribunal, a preliminary objection was raised on behalf of the department that the second proviso to sub -section (1) of section 30 prevented the assessee from raising the question of assessment or apportionment of the firm's income. The preliminary objection was upheld by the Tribunal, and the appeal of the assessee was dismissed on that ground. In the view taken by it, and the disposal of the appeal on the preliminary objection, the Tribunal has expressed no opinion as to whether the arrangement arrived at on 27the March, 1957, constituted a partnership agreement or merely an arrangement under which the two Iran is were to manage the business. On an application made by the assessee under section 66(1), the Tribunal has stated the case, raising the following two questions :

'1. Whether, on the facts and in the circumstances of the case, the appeal of the assessee was barred under the second proviso to section 30(1) of the Act ? and

2. Whether the income falling to the share of the assessee's minor daughter, Gulu, could be included in the assessee's assessable income under section 16(3) (a) (ii) of the Act ?'

(3.)MR . Kolah, appearing for the assessee, has contended before us that on a proper construction of the deed of date 27the March, 1957, it would be noticed that Gulu, who is a minor, has been made a full -fledged partner along with the other partners, and has not been admitted to the benefits of partnership; the deed of partnership has been signed on her behalf, and no provision for sharing losses is also made in the deed of 27th March, 1957. No partnership, as such, therefore, is constituted under the said deed. Reliance is placed by Mr. Kolah in support of his contention on the decisions reported in Commissioner of Income -tax v. Dwarkadas Khetan and Co. Commissioner of Income -tax v. Khetan and Co. and M. P. Devis v. Commissioner of Agricultural Income -tax.

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