- (1.) The question referred to this Court under Section 66(1) of the Act is In the facts and circumstances of the case, whether the Tribunal was right in holding that in view of the proviso to Section 30 of the Income-tax Act, the applicant was not entitled to claim in appeal against his own assessment that his real income was what remained after deduction of the share of commission diverted to his son and grand-son under the terms of the deed dated November 18, 1943.
(2.) The facts as taken from the statement of the case are as follows: The assessment year in question is 1952-53, the corresponding previous year being the calendar year 1951. The application for reference was made by P.L. Sonthalia and another as the executors and trustees to the estate of the late Radhakishan Sonthalia, who was the Assessee before the Income-tax Officer and has throughout been referred to as the Assessee. During the relevant previous year the Assessee was a partner of a firm styled Messrs. Radhakishan Sonthalia which was a registered firm. This firm had four partners, i.e., (i) the Assessee (the deceased) with -/3/6 share, (ii) Subhkaran Sonthalia with a similar share, (iii) Parameswarilal and Iswariprosad Sonthalia jointly having -/3/6 shares each and (iv) Mahaliram Sonthalia holding -/5/6 shares. The firm of Radhakishan Sonthalia used to receive from Messrs. Birla Brothers Limited one moiety of the managing agency commission payable by Kesoram Cotton Mills Ltd. In the assessment of the said firm for the assessment year under consideration, allocation was made to the Assessee under Section 23(5)(a) in respect of his -/3/6 share in the income of the firm and the amount was included in the total income of the Assessee in his personal assessment. The Assessee's contention was that in the year 1943 there was a partition in his family as a result of which his only son Muralidhar Sonthalia, for self and as the natural guardian of his minor son, separated from him. It was claimed that by a deed of partition dated November 18, 1943, the -/3/6 share of Radhakishan Sonthalia in the managing agency commission of Kesoram Cotton Mills Ltd., was divided amongst the members of the family in the following manner : Sri Radhakishan Sonthalia Shri Muralidhar Sonthalia (for self and as Karta and natural guardian of his minor sons)Sitaram Sonthalia (son of Muralidhar Sonthalia) On the strength of this the Assessee contended before the Income-tax Officer that his share of income in the managing agency commission was only Re. 0-1-9. This was rejected both by the Income-tax Officer as also by the Appellate Assistant Commissioner. At the hearing before the Tribunal a preliminary objection was raised on behalf of the Revenue to the effect that the second proviso to Section 30(1) of the Income-tax Act precluded the Assessee from raising this contention. It was argued that the extent of the share of the Assessee in the managing agency commission earned by the firm being a matter determined finally in the assessment of the firm itself, it was not open to the Assessee to appeal against the inclusion of the said share of the firm's income in his own individual assessment. The Tribunal found that the application for registration for the relevant assessment year was signed by the Assessee himself as a partner claiming 0-3-6 share in the firm and there was nothing in the application to suggest that he had a different share. There was also nothing to show that he had signed the application in a representative character as the Karta of his family consisting of himself and others. The Tribunal further relied on the judgment of this Court in K M ADAM V/S INCOME-TAX OFFICER, II ADDITIONAL II CIRCLE, MADRAS, 1958 33 ITR 26.
(3.) On behalf of the executors to the estate of the assesee it was contended before us that what the Income-tax Officer has to determine is the 'real income' of the Assessee and this is permissible only in the individual assessment. It was argued on the strength of the judgment of the Supreme Court in Commissioner of Income-tax, West Bengal v. Kalu Babu Lal Chand,1960 37 ITR 123 that it is always open to a partner in a registered firm to contend in his own assessment that the share of income of the partnership firm which he gets is not his individual income but belongs to himself along with others. This was further sought to be fortified by another judgment of the Supreme Court in Commissioner of Income-tax, Bombay v. Shoorji Vallabhdas and Co., 1962 46 ITR 144 where it was observed that what the Income-tax Officer has got to consider is not the hypothetical income but the income which has accrued or was received by the Assessee. Reliance was also placed upon two judgments of the Bombay High Court in Seth Motilal Manekchand v. Commissioner of Income-tax, Bombay,1957 31 ITR 735, and Ratilal B. Daftari v. Commissioner of Income-tax,1959 36 ITR 18.;