TMI Blog2002 (7) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... nces were filed by the Revenue and they are pertaining to different assessment years. Income-tax References Nos. 154 of 1989 is in respect of the assessment year 1976-77, 150 of 1989 is in respect of the assessment year 1978-79, 162 of 1989 is in respect of the assessment year 1981-82, and 180 of 1988 is in respect of assessment years 1982-83 and 1983-84. Since a common issue is involved in all the four references, they are disposed of by this common judgment. At the instance of the Revenue, the following question of law is referred to for the opinion of this court: "Whether, on the facts and in the circumstances of the case, the finding of the Appellate Tribunal that no sub-partnership was formed between the assessee and his wife, Smt. Suryakanta Natwarlal, and the share of the assessee's wife could not be included in the income of the assessee, is correct in law and sustainable from the material on record?" Although there is slight variation in framing of the question for the subsequent years, the controversy raised is same in all the four assessment years and, hence, considering the question raised and referred to in Income-tax Reference No. 154 of 1989 and the facts state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1974-75 that the second transaction partook of the character of sub-partnership. By the second transaction, the Tribunal was referring to the deed of partition. However, the Tribunal ultimately directed the Income-tax Officer to decide the matter in the light of the said decision in the case of Mahendrasingh Mohansingh [1980] 123 ITR 938 (Guj). The Commissioner (Appeals) allowed appeal filed by the assessee. Being aggrieved by the order of the Commissioner (Appeals), the Revenue has preferred an appeal before the Tribunal and the Tribunal has considered its earlier order in the assessee's own case for the assessment years 1972-73 to 1974-75 and has also dealt with the judgment in the case of Mahendrasingh Mohansingh [1980] 123 ITR 938 (Guj) and after distinguishing the facts of the assessee's case with the facts of the case, the Tribunal has come to the conclusion that "the case of Mahendrasingh Mohansingh [1980] 123 ITR 938 (Guj) was quite different. In that case, pursuant to the partition an agreement was effected between the assessee and his wife and their son, agreeing that the assessee be allowed to use the sums received by the son and wife on partition so as to continue to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son. In consideration of the use of these amounts, the assessee agreed to share equally with his wife and son the profits coming to his share from the firm, subject, however, to the obligation of making to each of them a minimum payment of Rs. 1,000 per annum. On these facts, the question that arose before the court was whether the wife and minor son became partners in the firm, or, in the alternative, a sub-partnership came into existence between them and the assessee. On these facts, this court has held that (i) the wife and minor son of the assessee did not become partners in the firm; (ii) however, there was a sub-partnership between the assessee, his wife and their son because all the three elements necessary to constitute a partnership were present. The assessee, his wife and his minor son agreed to share the profits earned by the assessee; and the assessee continued to act as a partner not only on behalf of himself but also on behalf of his wife and minor son in the main firm. The agreement was merely for sharing of profits coming to the assessee from the main firm and, therefore, the mir or son of the assessee could never be held liable for the losses of that sub-partnershi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportant point of distinction between the facts of Mahendrasingh Mohansingh's case [1980] 123 ITR 938 (Guj) and the facts of the present case and which is rightly carved out by the Tribunal after considering the partition deed is that actually the assessee's right to receive 50 per cent. share from the firm, N. Desai and Co., was subject to 1/2 of it being given to his wife and that the wife had a prior charge over the share income received from that firm. The Tribunal has, therefore, come to the conclusion that this was not a case of sharing the profits of a partnership between the assessee and his wife but of subjecting the assessee's share from the firm of N. Desai and Co. to 50 per cent. charge by the wife. It is not as if the asses see and his wife are jointly doing some business and after the profits are received from that business, they are dividing it between themselves. It was also found by the Tribunal that the assessee was not carrying on the business for himself and his wife and that the assessee was merely a partner in the firm N. Desai and Co. having a right to get 50 per cent. share of the profits. That 50 per cent. share was subject to the charge of his wife to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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