9911796707
TMI Blog1989 (6) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... Jenendra Kumar Jain and S/Shri Ashok Kumar Jain and Sharad Kumar Jain, who are the wife and sons of late Shri Sumat Prasad Jain, a partnership was created in the name and style of M/s Sumat Prasad Jain Co. By this agreement it was stated that the said Jenendra Kumar Jain has been authorised to enter into partnership in the firm M/s Kishan Flour Mills and he shall be liable to account for all the profits and gains arising to him in the said firm and such profits shall be deemed to be the profits and gains arising to the firm M/s Sumat Prasad Jain Co. It was further agreed that all benefits, gains and rights of a partner belong to Shri Jenendra Kumar Jain as a result of his participation in the partnership firm of Kishan Flour Mills shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Co., constituted by the assessee and her three sons, one of whom, namely, Jenendra Kumar Jain is a partner in the said Kishan Flour Mills. As per deed of partnership of M/s Sumat Prasad Jain Co., Shri Jenendra Kumar Jain is a partner in Kishan Flour Mills as a representative of the persons constituting M/s Sumat Prasad Jain Co. Exemption under sec. 5(1)(xxxii) of the Wealth-tax Act is available to a person in respect of the value of the interest of the assessee in the assets forming part of an industrial undertaking belonging to a firm or an Association of Persons, of which the assessee is a partner, or, as the case may be, a member. The industrial undertaking admittedly belongs to M/s Kishan Flour Mills and admittedly the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally become the partners of the main partnership firm. What has been held is that in such cases the partner, who represents the sub-partnership in the main partnership is not the exclusive owner of the profits and the entire amount cannot be taxed in his hands. It has been held that a sub-partner has definite enforceable rights to claim a share in the profits accrued to or received by the partner in the original partnership. Reliance was also placed on CIT v. Sakina Bai Ibrahim Sons [1985] 154 ITR 540 (Mad.), in which the following observations were made :-- "A sub-partnership is a partnership within a partnership. The vital requirement of a partnership is an agreement to divide the profits and losses by the parties to the agreement. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of the firm, M/s Kishan Flour Mills. 8. In CIT v. Bagyalakshmi Co. [1965] 55 ITR 660 (SC) a question arose, whether coparceners of Hindu undivided families, whose kartas were partners in a partnership firm could be said to be the partners of such firms. The Hon'ble Supreme Court held that the coparceners could not be the partners of the firm and it were only the Kartas, who, having entered into the contract of partnership, were the partners. The Hon'ble Supreme Court observed as under :-- "A contract of partnership has no concern with the obligation of the partners to others in respect of their shares of profit in the partnership. It only regulates the rights and liabilities of the partners. A partner may be the karta of a joint H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hers and the rest of the partners or the partnership as a body cannot, in law, be deemed to have become partners of the firm, which such partners constitute with third parties. In our view, therefore, the assessee cannot be deemed to be a partner of the firm, M/s Kishan Flour Mills to which the industrial undertaking belongs nor can the said industrial undertaking be deemed to belong to the firm M/s Sumat Prasad Jain Co., of which the assessee is a partner. We, therefore, agree with the authorities below that the assessee was not entitled to exemption under sec. 5(1)(xxxii) of the Wealth-tax Act. 9. The assessee having failed on the main issue, the consequential contention regarding the quantification of the amount of exemption becomes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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