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Issues:
1. Assessment of share of profits from a partnership in the hands of a Hindu undivided family or individual members. 2. Validity of partial partition claimed in the Hindu undivided family. 3. Treatment of income derived from partnership assets post-partial partition. 4. Disagreement between Income-tax Officer, Appellate Assistant Commissioner, and Tribunal regarding the partition and assessment of income. 5. Interpretation of law regarding partial partition in Hindu undivided families and its impact on income assessment. Detailed Analysis: 1. The main issue in this case was whether the share of profits from a partnership should be assessed in the hands of a Hindu undivided family or its individual members. The dispute arose due to a claimed partial partition in the family. The Income-tax Officer initially held that the family itself continued to be the partner in the firm, leading to the assessment of share income in the family's hands. 2. The Appellate Assistant Commissioner considered the entries in the family's books showing the division of capital among the three members but concluded that there were no corresponding changes in the partnership's constitution. He viewed the division as merely a sharing of income among family members post-earning. 3. The Tribunal emphasized the necessity of a co-ordination between the division of assets and their utilization in the partnership business for income assessment. It held that if a Hindu undivided family divides its business assets and enters a partnership using those assets as capital, the income should be taxed in the hands of the partnership, not the family. 4. The Tribunal's decision was based on the evidence of a partial partition in the family's assets, supported by entries in the family's accounts. It rejected the arguments of the Income-tax Officer and the Appellate Assistant Commissioner, highlighting the erroneous view that the division was not valid due to the absence of corresponding entries in the firm's books. 5. The judgment reiterated the legal principle that post a partial partition, income from divided assets should be assessed in the hands of individual members, not the joint family. It emphasized the importance of proper accounting entries as evidence of partition, regardless of the absence of such entries in the partnership's books. The judgment clarified that the father's role in the partnership post-partition was distinct from his representation as the karta of the joint family. In conclusion, the Tribunal's decision was upheld, affirming that the income derived from the partnership after the partial partition belonged to the individual members, not the Hindu undivided family. The judgment emphasized the significance of proper accounting entries to establish a valid partition and the correct assessment of income in such cases.
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