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TMI Blog1984 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... us of an unregistered firm ? One Taharally Sarafally was a partner of M/s. Abbasbhoy Taharally Company, having a one-third share therein. On his death on April 26, 1951, a fresh partnership deed was executed and Begum Sakina Bai, wife of Taharally Sarafally, was taken in as a partner in place of her deceased husband and was also given her deceased husband's one-third share in the partnership. At the time of the death of Taharally Sarafally, he had also left behind him two sons and three daughters, besides his widow and all the children were minors. Though originally all the heirs of the deceased Taharally Sarafally were agreed to be taken in as partners in his place in the firm of M/s. Abbasbhoy Taharally Company, ultimately Begum Sak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the agreement created a sub-partnership between Begum Sakina Bai and her children to share the share income accruing to Begum Sakina Bai from M/s. Abbasbhoy Taharally Company and this income should be assessed in the status of an unregistered firm and accordingly assessed the same. On appeal, the AAC found that the assessment had not been completed after a due investigation and collection of the relevant materials therefor, that the mere circumstance that pursuant to a notice under s. 148 of the Act, the assessee filed a return claiming that the share income of M/s. Abbasbhoy Taharally Company should be assessed in the status of an unregistered firm consisting of Begum Sakina Bai and her two sons and three daughters would not jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel upon the decisions in Murlidhar Himatsingka v. CIT [1966] 62 ITR 323 (SC), CIT v. Mahendrasingh Mohansingh [1980] 123 ITR 938 (Guj), Munuswami Chettiar v. Narasimhalu Chettiar [1958] 11 MLJ 233, Addl. CIT v. Chandulal C. Shah [1977] 107 ITR 91 (Guj), Shiv Narain Agarwal v. CIT [1983] 139 ITR 999 (All) and Kamath Co. v. CIT [1971] 82 ITR 680 (SC). On the other hand, the learned counsel for the assessee submitted that under the agreement dated April 15, 1963, the share income of Begum Sakina Bai in the firm of M/s. Abbasbhoy Taharally Company was not agreed to be dealt with and divided among the parties thereto, but that the agreement merely reiterated and declared the rights of the parties thereto which had already devolved on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company, as representing the share of Taharally Sarafally and that the entire amount which stood to the credit of Taharally Sarafally in the books of account of M/s. Abbasbhoy Taharally Company was transferred to the account of Begum Sakina Bai. There is a further reference in the preamble to the shares of the parties thereto and the need to record such shares in order to avoid misunderstanding in the family in the future. In the body of the agreement, it is recited that after the death of Taharally Sarafally, Begum Sakina Bai was treated as a partner in place of and entitled to the share of said Taharally Sarafally in the firm of M/s. Abbasbhoy Taharally Company and that Begum Sakina Bai continued as a partner in the firm of M/s. Abba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm by that partner as well as by others, be they strangers or relations, would constitute a sub-partnership, bringing into existence the relationship of partners inter se amongst them, without in any manner affecting the partners of the firm. Essentially, therefore, a sub-partnership has its origin in and is traceable to an agreement, whereunder, one of the parties to the agreement, who is already a partner in a firm and is in receipt of share of profits, agrees to divide or share such profits with the other parties to the agreement. Rights in a sub-partnership are thus referable to and based on contract only. It is difficult on the terms of the agreement in this case to spell out a sub-partnership as normally understood and recognised. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, therefore, in this case, one of the essential requirements of a sub-partnership, namely, an agreement, to share the profits of one of the partners with others, is absent. The terms of the agreement do not spell out a partnership between Begum Sakina Bai and her children, as there is no agreement between Begum Sakina Bai and her children to share the profits received or losses suffered by Begum Sakina Bai in the firm of M/s. Abbasbhoy Taharally Company. That the idea of partnership was not in the contemplation of the parties to the agreement is evident from the circumstance that the rights of the parties to the agreement had been referred to and dealt with as rights of inheritance to the share of Taharally Sarafally in the firm of M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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