TMI Blog1980 (7) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... in accordance with law ? " M/s. N. S. Corporation was a partnership firm consisting of 8 partners up to August 4, 1972 on which date one of the partners, Ramachandra Shastry, passed away. There was thus a change in the constitution of the firm and the firm continued with the 7 surviving partners and deed of partnership was also executed in that behalf. Prior to the death of Ramachandra Shastry as well as subsequently, the partners of the firm were entitled to share the profit and loss equally. The question referred to this court involves the method to be adopted for the allocation of the profits between the partners in the two periods, i.e., prior to and subsequent to, the change in the constitution of the firm. The ITO computed the tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the firm and in the instant case by making such deduction, the balance amount would be Rs. 3,63,870 and this amount had to be apportioned between the partners as provided in the proviso to s. 187(1) of the Act. It observed that there was no necessity for reapportioning the tax between the two periods because even if the tax was deducted from the total income and the net figure was apportioned between the two periods in the same ratio, as was determined by the ITO, namely, Rs. 1,51,515 to Rs. 3,28,382, the result would be the same, and dismissed the appeal by the assessee. It is contended by Sri Srinivasan, learned counsel for the petitioner, that the proviso to s. 187 would apply only to a case where there is change in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see who is a partner of firm, whether the net result of the computation of total income of the firm is a profit or a loss, his share (whether a net profit or a net loss) shall be computed as follows: (a) any interest, salary, commission or other remuneration paid to any partner in respect of the previous year, and, where the firm is a registered firm or an unregistered firm assessed as a registered firm under clause (b) of section 183, the income-tax, if any, payable by it in respect of the total income of the previous year, shall be deducted from the total income of the firm and the balance ascertained and apportioned among the partners ;..." By making the deduction as enjoined by s. 67(1)(a) of the tax payable by the firm from its tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who has been a partner of the firm only for a part of the previous year to receive the income proportionate to that period and also limits his liability to tax only on that portion of the income to which he would have been entitled for the restricted period during which he was a partner. The view taken by the Tribunal that the correct method was to deduct the tax payable by the firm from the total income of the firm in the first instance and only the balance so ascertained would be the amount that had to be apportioned between the partners entitled to receive the same is correct and is justified by a combined reading of s. 67(1)(a) and the proviso to s. 187(1). The actual amounts allocated as profits assessable in the hands of the partners ..... X X X X Extracts X X X X X X X X Extracts X X X X
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