9911796707
TMI Blog1997 (12) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... 78-79. The assessee was a partner in the solicitor firm, Bhaishankar Kanga and Girdharlal, from May 1, 1952, up to December 31, 1972. After his retirement on December 31, 1972, the assessee was entitled to receive from the said firm his share of profit in respect of the work done prior to the date of his retirement. Admittedly, the accounts of that firm were maintained on cash or receipt basis and the accounting year of the firm was the calendar year. On December 27, 1976, the assessee executed a deed of settlement by which he irrevocably assigned to the trustees, his right to receive, recover and realise from the said firm, his share according to the various partnership deeds which were executed from time to time, and all the recoveries for the relevant period already made and not accounted for by the firm prior to December 31, 1975, and thereafter to be made by the firm and all the right, title, interest, claim and demand whatsoever of the assessee. The trust so formed was named as "M. G. Doshit Family Trust" and the three trustees declared that they shall hold the trust property upon trust as envisaged in the deed. This arrangement was made in consideration of the love and aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be decided by the Bombay High Court in CIT v. Kanchanlal L. Talsania [1983] 141 ITR 284, similar contentions were accepted and holding that the amount in question was not determined and could be said to have accrued only when the accounts of the firm were settled which was long after the assessee had retired from the firm and that the assessee had already assigned his right or source of income, dismissed the appeal of the Department. Learned counsel appearing for the Revenue strongly contended that there was no diversion of the source of income and the right to recover the amount which already had crystallised, was in issue and the arrangement made by the settlor was only application of the amount which had already accrued in his favour. It was submitted that the fact that these amounts were received at a later date, would not make any difference. It was also submitted that the retired partner alone was entitled to the share in profit and assets and there could be no assignment of his share after his retirement, in view of the provisions of section 29 of the Indian Partnership Act. It was submitted that fees which were payable in respect of the work done during the period wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expressly prohibited. The deed of assignment was also signed by the trustees. The trustees were the assessee, his wife and Mr. J. M. Thakore. Under section 60 of the said Act, it is provided that all income arising to any person by virtue of a transfer whether recoverable or not and whether effected before or after the commencement of the Act shall, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the transferor and shall be included in his total income. The word "transfer" is defined in section 63 for the purposes of sections 60, 61 and 62 and it includes any settlement, trust covenant, agreement or arrangement, as provided in clause (b) thereof. The object underlying the provisions of section 60 is to meet with the device which was being adopted by the assessees by which while retaining the interest in the property, its income would be allowed to go to someone else, so that it is not taxed in the hands of the assessee. In such cases, even if the arrangement is made by which the income is received by someone else, by fiction it would be regarded as the income of the transferor and assessed as such. This ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beneficiaries. It is not the case of the Department that the settlement deed was not bona fide or that there was no validly executed transfer of actionable claim. The assessee had an absolute right to effect such transfer which he did by the deed of settlement in respect of the amounts that were to come to his share as and when they would accrue at the end of the year, when the firm was to settle the account. Since the firm maintained its account on receipt or cash basis, no amount can be said to have been accrued until the firm recovered from its clients and until at the end of the year the accounts were settled. As held by the Supreme Court in CIT v. Ashokbhai Chimanbhai [1965] 56 ITR 42, it is only when the right to receive the income becomes vested in the assessee that it can be said to accrue or arise. In the case of a partnership firm, the right of a partner to demand his share does not arise until the contingency, which by operation of law or under a covenant of the partnership deed, gives right to that right has arisen. The concept of accrual of profits of a business involves their determination by the method of accounting at the end of the accounting year or any shorter p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrevocably under the indenture of settlement executed by him. It is pointed out to us from the Digest of Direct Taxes (Taxman), volume I, page 502, that the special leave petition which was filed by the Department against the decision of the Bombay High Court in Talsania's case [1983] 141 ITR 284, was dismissed by the Supreme Court. On the facts of the present case, it is clear that the income to which the assessee would have become entitled on its accrual at the end of the accounting year was diverted by him by creating an overriding title in favour of the trustee. The finding of fact in this regard by the Tribunal can hardly be assailed on any cogent ground. We are, therefore, of the opinion that the Tribunal was right in coming to the conclusion that the sum of Rs. 49,890 was not liable to be included in the income of the assessee in view of the provisions of section 60 of the Act. We are fortified in our above view by the decisions of this court in CIT v. Nandiniben Narottamdas [1983] 140 ITR 16, Jyotsnaben Narottamdas v. CIT [1983] 142 ITR 91 and the decision of the Supreme Court in Murlidhar Himatsingka v. CIT [1966] 62 ITR 323. As regards the second question, it is cle ..... X X X X Extracts X X X X X X X X Extracts X X X X
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