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TMI Blog1983 (8) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... 79-80 for which the accounting year ended on 31st March, 1979. The assessee derives share income from three firms, namely, M/s Thangam Brick Works, M/s Brilliant Salt Trading Co., and M/s Thangam Salt Company. Ordinarily the ITO completed the assessment u/s 143(1) on 18th March, 1982 determining the total income at Rs. 41,150 in which the claim of the assessee for deduction of Rs. 5,000 paid by that firm M/s Thangam Brick Works was not allowed by the ITO. On the objection made by the assessee the ITO reconsidered the claim of the assessee and passed assessment order u/s 143(3) on 30th March, 1982 wherein the claim of the assessee was rejected following the decision of the Tribunal in the case of Shri Janakarajan vs. ITO. 3. On appeal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share income received from the firms. In this connection, it was stated that the Kartha became a partner solely by virtue of joint family capital invested in the partnership firms and, therefore, the income was primarily earned by utilising the joint family assets or funds and the fact that the Kartha had rendered some personal services did not alter the character of income. Further he contended that in terms of clear provisions of law in s. 40(b) read with s. 67(b) any remuneration received by a partner as share income of the firm was assessable as such and the decision of the Supreme Court relied upon by the AAC had not considered the effect of s. 67(1)(b) of the IT Act. On the other hand he would concede any such claim if the Kartha ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company or controlling interest. In the case of the firm any person can enter in to agreement with other persons to from a partnership and contribution of capital is not always a condition precedent. For example technically qualified and skilled persons can enter into partnership as working partner without contributing any capital whatsoever. Further the principle of agency by which each partner agree to carry on the business for and on behalf of others and the principle of mutuality by which each partner acts independently in the capacity of a partner subject to the joint and several liability are not applicable in the case of a company. Further, there are specific provisions for computation of total income of a firm and computation of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce before it accrued or was received by the HUF through its Kartha by doctrine of overriding title. Further, there is no question or finding that the rendered any specific services to the HUF or in the furtherance of interest of an HUF in the firms in which he is a partner in the representative capacity. Unfortunately the findings given by the AAC go against the assessee, as much as it has been found by him that the assessee has rendered only services to the firm. The record shows that the assessee had not made any such claim before the authorities or before us, so as to justify the claim of deduction. 9. In this connection, it is relevant to point out that the deed of partnership dt.14-4-1981 provides that the profit or loss of the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s other partners. Even the allowance granted to the Kartha is very nominal and that too for services rendered to the firm. From the order of the AAC, it is seen that Shri Sundararaj Nadar goes to the village where Thangam Brick works is located and, therefore, personal services were rendered to the firm. From the deed of partnership it is found that the factory for manufacturing bricks is located at Thoothai Village Manamadurai Taluk which is about 75 miles from Madurai where the business of sale is carried on. It is highly improbable that a partner could travel up and down daily to the factory at the neglect of the business at Madurai. Even if it is true the expenses incurred by the partner for to and fro journey has been compensated by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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