1983 (1) TMI 33 - HC - Income Tax

Summary

Issues:
1. Registration of partnership firm denied by ITO.
2. Inclusion of share income in assessee's income.
3. Dispute over ownership of capital contribution in partnership firm.
4. Allegation of benami transaction by assessee's wife.
5. Tribunal's findings challenged under Indian I.T. Act, 1922.

Analysis:
The High Court of Bombay addressed the issues arising from the denial of registration to a partnership firm and the inclusion of share income in the assessee's income. The court noted that the ITO had refused registration to the firm for the assessment year 1956-57, alleging that the assessee controlled the business and enjoyed the profits, despite the capital being contributed by his wife. The assessee initially declared the share income but later omitted it from the return. The Tribunal reversed the AAC's decision and remanded the case, leading to a detailed examination of the ownership of the capital contribution.

The court considered the affidavits filed by the assessee's wife, asserting that the capital was sourced from her stridhan and investments in properties. However, the ITO rejected this claim, citing the assessee's previous financial activities and the wife's lack of involvement in the business. The AAC upheld the ITO's view, declaring the wife as a benamidar for the assessee. The Tribunal, after analyzing multiple circumstances, affirmed the lower authorities' decisions, leading to two questions referred under the Indian I.T. Act, 1922.

Regarding the first question, the court clarified that the sufficiency of material is not a question of law. The counsel argued against the benami character of the investment, but the court emphasized the various circumstances supporting the finding that the assessee, not his wife, made the capital contributions. Consequently, the court answered the reframed question in the affirmative, upholding the Tribunal's findings. Subsequently, the second question was also answered against the assessee, affirming the inclusion of the wife's income in the assessee's assessment for the relevant year. The court directed the assessee to bear the costs of the reference, concluding the judgment.