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TMI Blog1971 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement of Shyam Sunder. The statement was to the effect that there was a partnership firm, M/s. Moti Lal Shyam Sunder consisting of two partners, Shyam Sunder and Moti Lal, with equal shares. Shyam Sunder represented his Hindu undivided family in that firm. On July 31, 1961, the credit balance in the accounts of the Hindu undivided family maintained in the books of the firm amounted to Rs. 3,45,769 and this amount was divided in eight equal parts in consequence of which a sum of Rs. 43,221 was transferred to the credit of Smt. Shanta Devi and also to the credit of each of the six sons of Shyam Sunder. A sum of Rs. 43,221 was allowed to remain in the account of Shyam Sunder. Smt. Shanta Devi also sent a written note to the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u undivided family from getting its profits up to July 31, 1961, ascertained for the purposes of partition, and held that the partition of a part of an asset could not be envisaged in law and, therefore, the partial partition claimed by the assessee was invalid. At the instance of the assessee the Tribunal has referred the following question: "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no valid partial partition in law on July 31,1961, as claimed by the Hindu undivided family ? " In income-tax reference No. 142 of 1967, the assessee is the partnership firm, M/s. Moti Lal Shyam Sunder, and the assessment year is 1962-63. The firm paid interest on the sums credited to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hindu undivided family and relates to the assessment year 1962-63. The Income-tax Officer, proceeding on the view that the partial partition claimed by the assessee had not been proved, assessed the income from the share in the partnership firm in the hands of the Hindu undivided family. On appeal by the assessee the share income was excluded by the Appellate Assistant Commissioner, who, as we have pointed out, accepted the claim of partial partition. On appeal by the Income-tax Officer, the Income-tax Appellate Tribunal, held that the Income-tax Officer was justified in assessing the half share in the firm in the hands of the Hindu undivided family. It also held that the property which had been purchased by Smt. Shanti Devi from out of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of the partnership firm was partitioned between the members. As regards the profits earned up to July 31, 1961, it was not possible on that date, to ascertain what was the amount of profits for that period, Under paragraph 3 of the partnership deed, it was stipulated that the accounts were to be made up at the end of the calendar year. According to the contract of partnership, it was not open to either partner to insist upon the accounts being made up before that date. So long as clause 3 of the partnership deed continued in its original terms, the partners were bound by it and had to await the end of the calendar year before the accounts could be made up. It was only upon the accounts being made up that it could be ascertained whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned, the question assumes practical importance, for it is only on the right to receive profits or income, profits accrue to that person. If there is no right, no profits will be deemed to have accrued." Reference was made to the decision of the Supreme Court in E. D. Sassoon & Co. Ltd. v. Commissioner of Income-tax. The learned judges went on to observe that the working of the company from day-to-day could certainly not indicate any profit or loss and even the working of the company from month to month could not be taken as a reliable guide for the purpose. " If the profit or loss has got to be ascertained by a comparison of the assets at two stated periods, the most business-like way of doing it would be to do so at stated intervals of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no valid partial partition in law on July 31, 1961. The question referred in Income-tax Reference No. 146 of 1967 is answered in the negative. Consequently, the question referred in Income tax Reference No. 142 is answered as follows : " As there was a valid partial partition in law on July 31, 1961, in the Hindu undivided family, the Tribunal was not justified in holding that the interest of Rs. 7,482 paid by the firm to the wife and minor sons of Shyam Sunder was rightly added back to the income of the firm. The question is answered in the negative." As regards the questions in Income-tax Reference No. 143 of 1967, they are answered as follows : Question No. 1. In the negative. Question No. 2. In the negative. Question N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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