9911796707
TMI Blog1985 (2) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... oner (Appeals) held that as the assessee was not a partner of the firm at the end of the previous year, namely, on 31-5-1976, section 64(1)(i) was not attracted to the case. He, therefore, held that the income of the husband of the assessee cannot be clubbed with her income. Aggrieved by the same, the department has come up in appeal. 3. For a proper appreciation of the dispute involved in the case, some more facts, which were ascertained at the time of the hearing of the appeal, have to be stated. As already stated, the accounting period of the firm was from 1-6-1975 to 31-5-1976. During the period from 1-6-1975 to 30-11-1975 the partners were the assessee, her husband, A.C. Raghava Menon, and Shri A.C.G. Menon. There was a reconstitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d due to the husband of the assessee only on 31-5-1976 when the accounts of the firm were closed, that on this date the assessee was not a partner of the firm, as she had retired from the firm on 1-1-1976 and that section 64(1)(i) was not, therefore, attracted to the case. It was this contention that was accepted by the Commissioner (Appeals). The department now questions the correctness of this finding. 5. The arguments advanced by the learned departmental representative were to the following effect. The question, whether the assessee was a partner of the firm when the accounts of the firm were closed, is totally irrelevant in deciding the applicability of section 64(1)(i). The only requirement of the section is that the husband of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of the contention, the learned representative for the assessee relied upon the dictum laid down by the Supreme Court in CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42, that profits do not accrue from day to day or even from month to month and have to be ascertained by a comparison of assets at two stated points, that unless the right to profits comes into existence there is no accrual of profits, that the destination of profits must be determined by the title thereto on the day on which they arise and that in the case of a partnership, where the accounts are to be made at stated intervals, the right of a partner to demand his share of the profits does not arise until the contingency, which by operation of law or under a covenant of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, clear that the share income from the firm accrued to the husband of the assessee only on 31-5-1976. On this day, the assessee was not a partner of the firm. Section 64(1)(i), so far as it is relevant for the present purpose, provides that in computing the total income of the assessee there shall be included the income arising to the husband of the assessee from his membership in a firm in which the assessee is a partner. In our view, for the section to apply, the assessee must have been a partner of the firm when the share income from the firm accrued to the husband of the assessee. This view is strengthened by the decision of the Bombay High Court in Bhogilal Laherchand v. CIT [1955] 28 ITR 919. The decision in the case of Arvind B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in the case of Arvind Bhogilal that the income had not accrued to Arvind at the time of his death as the income accrued due to him only on the closing of the accounts of the firm which was later. The later decision in the case of Arvind Bhogilal is relevant only in considering the question whether the income accrued to the husband of the present assessee at any date earlier to the closing of the accounts. The earlier decision in the case of Bhogilal Laherchand also turned on the question whether the income had accrued to the minor for the purpose of clubbing the same with the income of his father. The question in the present form, namely, whether the income accruing to a spouse, when the other spouse is not a partner, could be clubbed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the person in whose hands it is assessed and that the section must, therefore, be construed strictly (vide Chaturvedi and Pithisaria's the Income-tax Law, Vol. 2, Third edn., p. 1840). 10. In view of what is stated above, the share income of the husband of the assessee for the period from 1-1-1976 to 31-5-1976 cannot be clubbed with the income of the assessee as the assessee had ceased to be a partner of the firm with effect from 1-1- 1976. But the share income of the husband of the assessee for the period from 1-6-1975 to 30-11-1975 accrued to the husband of the assessee at a time when the assessee was a partner of the firm. As already stated, there was a closing of accounts and the crediting of the share income to the account ..... X X X X Extracts X X X X X X X X Extracts X X X X
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