TMI Blog1990 (9) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... , and July 10, 1969, constituted the income of the present firm for the assessment year 1969-70 ?" The reference is at the instance of the Department. The assessee is reputed firm of solicitors. Its accounts are maintained on the cash basis. The deed of partnership involved in this reference is of September 1, 1967, which was effective from April 1, 1967. Clause 11 of the said deed provided that the partnership was not to be dissolved but to be continued in the event of the retirement, insolvency or death of any partner. Clause 16 of the deed provided that, in the event of the retirement or death of any partner, the retiring partner or the estate of the deceased partner, as the case may be, was to be entitled to the share of profits of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the deceased partners in the profits of the firm for the work done by it up to the date of their deaths to their legal heirs. The assessee filed its return of income for the assessment year 1969-70 declaring a total income of Rs. 10,49,186. This included the sum of Rs. 2,29,053 which was received by it on behalf of the deceased partners and which it was under a legal obligation to pay to the heirs of the two deceased partners. Subsequently, a claim was made that this sum should not be treated as the income of the assessee-firm as it never belonged to it. The Income-tax Officer rejected the claim and completed the assessment treating the aforesaid amount as the assessee's income for the year. The Appellate Assistant Commissioner accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm constituted under the partnership deed dated March 20, 1968, and only the partners thereof were entitled to share the same. The successor firms merely took upon themselves the function of collecting the outstanding fees which really belonged to the predecessor-firms merely as agents of the predecessor-firms and not in their own right. They collected the income belonging to the predecessor-firms for the sake of convenience and because a number of partners of the successor-firms were interested in the said income. The income was, thus, collected by them as agents or trustees and did not constitute their income. From these and other findings given in the aforesaid two paragraphs, the Tribunal came to the conclusion that the sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of a continuing firm. Shri Pardiwala, learned counsel for the assessee, on the other hand, referred to the findings given by the Tribunal in paragraphs 8 and 9 of its order. We stated that the question involved herein was squarely covered by the Calcutta High Court's decision in the case of CIT v. G. Basu and Co. [1990] 182 ITR 472 and the Madras High Court decision in the case of V. M. V. Devarajulu Chetty and Co. v. CIT [1950] 18 ITR 357. He also placed reliance on our court's judgment in the case of CIT v. Crawford Bayley and Co. [1977] 106 ITR 884. He emphasised that the amounts in question were never received by the assessee-firm as its income. In any event, they were diverted at source by an overriding title so much so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in CIT v. G. Basu and Co. [1990] 182 ITR 472 is squarely applicable. In the Calcutta case, two firms were carrying on practice as chartered accountants. They were facing certain troubles on account of disputes and differences among the partners. The dispute was referred to an arbitrator for settlement. Pursuant to the award of the arbitrator and in consequence of the deed of retirement, three partners of one of the firms retired in December, 1969. As per the terms of the deed of retirement, certain specific items of outstanding fees were directly assigned to the retiring partners. The question arose whether those outstanding fees which were directly assigned to the retiring partners represented the income of the firm. Observing that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in September 1940. In October 1942, two of the five partners retired from the firm whereafter the three surviving partners continued the business under the same name and style. Each of the two outgoing partners was paid a certain amount for his share of the assets and profit of the old firm up to the date of dissolution. In respect of certain forward contracts for the purchase of piece-goods from abroad that had already been entered into by the old firm but the deliveries under which had not been effected, the stipulation, as a result of arbitration, was that the new firm would pay the two old partners a sum of Rs. 18,911 in respect of their interest in the goods and their share of profits to be realised on the sale of the goods. Here aga ..... X X X X Extracts X X X X X X X X Extracts X X X X
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