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Issues: Interpretation of section 10(2A) of the Indian Income-tax Act, 1922 regarding the taxability of a sum credited to a deceased partner's account and subsequently distributed among the remaining partners.
Analysis: The judgment by the High Court of Allahabad involved a question referred by the Income-tax Appellate Tribunal regarding the taxability of a sum of Rs. 7,032 credited to a deceased partner's account and distributed among the remaining partners. The firm, originally a joint Hindu family business, converted into a partnership after a partition. The sum in question was credited to the deceased partner's account posthumously and distributed among the surviving partners. The Income-tax Officer included this sum in the assessable income of the firm under section 10(2A) of the Act. The Appellate Assistant Commissioner and the Tribunal upheld this decision, considering it taxable income. The court analyzed the provisions of section 10(2A) of the Act, which deem certain amounts received back by the assessee as taxable profits or gains. The sub-section applies when an allowance or deduction has been made in the assessment, and subsequently, the assessee receives the amount in question. In this case, the deduction was made in favor of the firm, but the amount was received by the partners, not for the purpose for which the deduction was allowed. Additionally, the court referred to a Supreme Court decision where it was held that a successor in business or legal representative receiving a refunded amount is not liable to tax under similar provisions. Based on the analysis, the court concluded that the conditions necessary for the application of section 10(2A) were not satisfied in the present case. The court answered the question referred in the negative, in favor of the assessee, and directed the department to pay costs to the assessee. The counsel's fee was also assessed at Rs. 200. In summary, the judgment clarified the interpretation of section 10(2A) of the Act in the context of amounts credited to a deceased partner's account and distributed among the surviving partners. It emphasized the conditions that must be met for such amounts to be deemed taxable under the provision, ultimately ruling in favor of the assessee based on the specific circumstances of the case and relevant legal precedent.
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