9911796707
TMI Blog1969 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... the terms of a partnership deed dated 15th May, 1953. The business which it is carrying on was first started some time in the year 1934, in partnership by three persons, viz., K. G. Patel, P. V. Patel and B. J. Patel in the name and style of Adarsha Dugdhalaya. In the year 1941, the three original partners of the firm took in three more persons, viz., Dabyabhai Morarji Patel, his brother-in-law, Ramjibhai Morarji Patel, and C. V. Mehta. This partnership of six persons commenced from January 1, 1941, and a deed of partnership embodying the terms of this partnership was executed on the 9th December, 1941. It appears that during the continuance of this partnership certain differences arose between the partners. They were, however, settled by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip from 31st October, 1949, for an order of winding up of the partnership under the directions of the High Court and for the appointment of a receiver. Ramjibhai retired from the partnership on the 31st October, 1952, and subsequently filed a suit on 4th of April, 1953, praying for similar reliefs as were prayed for by Dahyabhai in the earlier suit. On 30th October, 1954, a consent order was obtained from the High Court in both these suits under which it was declared that Dahyabhai and Ramjibhai had retired f rom the partnership on 31st October, 1949, and 31st October, 1952, respectively, and the remaining disputes between the parties were referred to an arbitration of two persons. In the meanwhile, the business after the retirement of Dah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bhai's retirement, i.e., on 31st October, 1952, was Rs. 16.76 lakhs and the total liabilities were Rs. 14.20 lakhs. Out of the balance of Rs. 2.56 lakhs, Rs. 93,000 were directed to be paid as fees of the arbitrators and solicitors on both sides (Rs. 21,000 as the fees of the arbitrators and Rs. 72,000 as the costs and fees of the solicitors). The surplus of Rs. 1.63 lakhs, which was left over, was directed to be distributed amongst the partners in accordance with their shares in the partnership profits. Payments, as directed by the awards, were made by the assessee during the account year ended on 31st October, 1957, and the amount of Rs. 1,65,500 made up of the arbitrators' fees and costs of the solicitors on the two sides in the two suit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of carrying on the assessee's business. According to it the disputes and differences between the partners were in relation to the terms and conditions of the partnership agreement and with regard to the proper valuation of the assets and liabilities and that it was for the purpose of settling these disputes that the expenses had been incurred. Consequently, this was not an expenditure for the purpose connected with the carrying on of the business, but to determine the mutual rights and obligations of the partners on the terms and conditions on which they had agreed to enter into the partnership from time to time. The Tribunal accordingly confirmed the decision of the departmental authorities and dismissed the assessee's app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present assessee-firm had to contest the exaggerated claims in order to protect the assets of the assessee-firm and preserve its business. Having regard to the nature of the litigation, Mr. Mehta has contended that the expenses incurred could justifiably be claimed by the assessee as expenses wholly and exclusively laid out for the purposes of carrying on its business within the meaning of section 10(2)(xv) of the Income-tax Act. We are unable to accept the submission made by the learned counsel. The suits, which were filed by the erstwhile partners, were against the continuing partners for the purpose of settlement of their rights, inter se, in respect of the partnership and for a settlement of the accounts of the partnership until t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business by the continuing partners. The resistance to the suit by the continuing partners again was in their own interest and not in the interest of the assessee-firm. The assets of the firm which subsequently carried on the business after the retirement of the outgoing partners, would be such assets as would be left over after the adjustment of the accounts of the partnership up to the date of retirement of the outgoing partners. A dispute as to what is the quantum of the claim of an outgoing partner as on the date of retirement cannot be a matter concerning the business of the reconstituted firm continued after the retirement of the partners. It may be that it may have some connection or relation to the assets of the continuing firm ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
