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Assessment of partner's income from a firm under a sub-partnership agreement. Analysis: The judgment by the Bombay High Court involved the assessment of a partner's income from a firm under a sub-partnership agreement. The case revolved around the contention of the assessee partner that the share of profits he received was not solely his income but was to be shared with other individuals under a sub-partnership agreement. The firm, Bombay Salt Dealers' Syndicate, had 16 partners who contributed capital in proportion to their share. The Income-tax Officer assessed the assessee's share at Rs. 14,661, but the assessee claimed that only 2/5th of this amount belonged to him, with the rest shared among four other individuals as per the sub-partnership agreement. The Appellate Assistant Commissioner held that the agreement was indeed a sub-partnership arrangement, diverting the income of the assessee by an overriding title. However, the Tribunal rejected the assessee's contentions, leading to an appeal before the High Court. The primary issue before the court was to determine whether the assessee should be assessed for the full amount of Rs. 14,661 or only for his actual share of Rs. 5,864 in the profits of the firm. The court considered the argument presented by the assessee's counsel, Mr. Samarth, based on the decision in Seth Motilal Maneckchand v. Commissioner of Income-tax. The court agreed that the real income of the assessee should be considered, excluding any amounts diverted to sub-partners. The court emphasized that in assessing a partner's income from a registered firm, the focus should be on the actual income earned by the partner, not any artificial income allocated through statutory provisions. The court also referred to a judgment from the Punjab High Court, highlighting the possibility of a sub-partnership within a partnership and the right of sub-partners to seek registration under the Income-tax Act. Ultimately, the court ruled in favor of the assessee, holding that only Rs. 5,864 should be assessed as his share in the firm's profits, not the full amount of Rs. 14,661. The court emphasized that the real income of a partner in a registered firm should be taxed, disregarding any artificial income allocations.
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