1966 (9) TMI 155 - HC - Income Tax

Summary

Issues:
Whether the sum of Rs. 2,400 formed part of the assessee's income.

Analysis:
The case involved a firm of partners where the partners were also part of another partnership with a deceased father. The deceased father, through his will, bequeathed his share in the second partnership to his sons, with a condition to pay a monthly sum to his daughter. The partners of the firm, after the father's death, entered into a new partnership deed stating the obligation to pay the monthly sum to the daughter. The question was whether this sum should be considered as part of the assessable income of the firm.

The court referred to the principle laid down by the Supreme Court regarding the diversion of income by an overriding charge. The key test was whether the amount sought to be deducted never reached the assessee as income. The nature of the obligation was crucial in determining whether it should be considered as part of the income. If the income is diverted before reaching the assessee, it is deductible; otherwise, it is not. In this case, the payment to the daughter was not a personal obligation of the partners but a charge on the partnership income. Therefore, the assessable income had to be computed after deducting the amounts payable to the daughter.

The court also cited precedents to support its conclusion, including a decision by the Judicial Committee of the Privy Council and a ruling by the Bombay High Court. Based on the principles established by these judgments, the court held that the sum of Rs. 2,400 did not form part of the assessee's income. The court awarded costs to the assessee and specified the advocate's fee.

In conclusion, the court determined that the payment made to the daughter was a charge on the partnership income and should be deducted before computing the assessable income of the firm. The court relied on established legal principles and precedents to support its decision, ultimately ruling in favor of the assessee and holding that the sum in question did not form part of the assessee's income.