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TMI Blog1957 (9) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... of partnership was executed on the 17th of December, 1945, the relevant provision of which, for the purposes of this reference, is that the goodwill of the business belonged exclusively to the father. This partnership continued till the 20th of August, 1948, which date falls in the assessment year 1949-50 when Boman retired, leaving Ruttonshaw and Darab as the two partners with shares of 10 and 6 annas respectively. A partnership deed was executed on the 6th of October, 1948, and the relevant provisions of the partnership deed are : "Clause 11 : The goodwill of the firm shall always be the property of the said Ruttonshaw Dhunjibhoy Shroff." "Clause 12 : On the death of Ruttonshaw Dhunjibhoy Shroff his nominee or nominees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn spirits, wines and beer in bottles, in the name and style of Shroff and Company. The shares in the net profits of myself and Darab in the said firm of Shroff and Company are in the ratio of 1 :6. As agreed between me and my partner, Darab, from and after my death my wife, Dinbai, during her lifetime shall receive one-fourth in the net profits of the said firm and the remaining three fourths of the net profits shall belong to my son, Darab. From and after Dinbai's death my son, Darab, shall be entitled to the entire profits of the said firm. "The goodwill of the firm which belongs to me shall belong fully to my son, Darab; and my wife, Dinbai, or anyone else shall not have any share in the same." "7. In case the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kolah for the assessee has contended that this amount of ₹ 5,877 never formed part of the income of the assessee at all; but it was diverted out of that income by an overriding title, and, therefore, it is not liable to be included in the profits of Shroff and Company which are taxable in the hands of the assessee. Although Mr. Kolah referred to a number of decided cases on this question, the ratio applicable to a case of this nature was laid down by their Lordships of the Privy Council in Raja Bejoy Singh Dudhuria v. Commissioner of Income Tax, Bengal, and that ratio, which has been adopted by a number of subsequent decisions of different High Courts in India, may shortly be stated to be that if part of an income is diverted by an ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but instead of directly exercising, as he had a right to do, the power of nomination, it appears that he entered into an agreement with Darab prior to the making of the will. This is clear from clause 6 of the will which I have reproduced above, which state : "As agreed between me and my partner, Darab........." It is not suggested that there was no such agreement, precedent to the making of the will, and the nature of the agreement must be gathered from the real nature of what was sought to be done. It was that the goodwill that belonged to Ruttonshaw was to belong fully to Darab and Darab agreed in his turn that so long as Dinbai lived, she shall receive from Darab one-fourth of the net profits of the said firm. That this one-fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Department in the hands of Dinbai. It becomes necessary sometimes for the Department to tax the same income in the hands of two different individuals as a precaution against the Court in one of the assessments taking the view that the income could only be assessed in the hands of one of the two assesses ;but we have always assumed that the State does not desire to tax the same income in the hands of two persons, and if and when the answer that we have given to the issue becomes final and conclusive between the parties, we have no doubt that the Income Tax authorities will refund the tax paid by Dinbai. 7. Our answer, therefore, to the question referred to us will be in the affirmative. 8. Assessee to pay costs. Question answered i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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