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TMI Blog1981 (1) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Lakhan Mishra, the party of the first part agrees that the work of Yeshwant Stadium allotted to him by the Nagpur Corporation shall be executed by the partnership firm formed hereunder ". Clause 8 of the partnership deed provides that Shri R. L. Mishra, who alone was entitled to receive the payments of the bills from the Corporation authorities, agrees to collect the bills for and on behalf of the firm and payments received by him shall always be treated as the funds of the firm. It appears that there was another deed of partnership dated November 26, 1969, one of the terms of which was that the firm known as Messrs. R. L. Mishra, Engineers Contractors, were to carry on the business of constructing buildings, bridges, roads and all other allied civil constructions. R. L. Mishra tried to have the contract with the Corporation which was held by him transferred in the name of the partnership firm but failed because the Corporation expressed its inability to do this retrospectively w.e.f. April 1, 1969, and asked Mishra to make a separate application if he desired that the partnership firm should be registered in the records of the Corporation. The partnership firm constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the order of the Tribunal which the Tribunal found were not very happily worded. The three questions which finally came to be referred were as follows : " (1) Whether, on the facts and in the circumstances of the case, the ITO was justified in resorting to ss. 60 to 63 of the I.T. Act ? (2) Whether, on the facts and in the circumstances of the case, whether the case was diversion of income by overriding title ? (3) Whether, on the facts and in the circumstances of the case, any order under the procedural s. 185 prejudices and precludes the effective application of the substantive s. 60 or s. 61 of the Act in the order under S. 143(3)." Shri Joshi appearing on behalf of the Revenue has drawn our attention to the correspondence between the assessee and the Corporation and contended that since the Corporation has refused to recognise the partnership as the contractor which was entrusted with the work of constructing the stadium, and inasmuch as so far as the Corporation was concerned, the assessee alone was recognised as the contractor, whatever monies were paid by the Corporation in pursuance of the contract must be treated as the income of the assessee alone. In oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the firm in so far as the partnership firm is concerned, though, as far as the Corporation is concerned, the Corporation paid the monies to the assessee in his individual capacity. Once the amount received from the Corporation is at the very threshold the property of the partnership firm, it is difficult for us to see how the arrangement brought about by the partnership firm can be overlooked so as to enable the ITO to treat the entire receipt or the amount of profits as the income of the assessee individually. There is another aspect of the question. The partnership firm evidenced by the document of partnership dated November 26, 1969, has been duly registered by the ITO. The pre-condition for making an order of registration by the ITO is that he has to find that the firm is genuine and that there is a registration of the firm; the deed of partnership itself has to be forwarded to the ITO.. One of the requirements of s. 184 is that in such deed of partnership the individual shares have to be specified in the instrument. The deed of partnership dated November 26, 1969, specifies the nature of the business which the partnership firm was intended to carry on. The three partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income arises. In the instant case, the asset, namely, the right under the contract which was the asset of the assessee individually, had become the asset of the partnership and on this short fact the provisions of s. 60 will have to be ruled out. One of the questions refers to s. 61 of the Act but it does not appear that either that question was argued before the Tribunal because it is obvious that s. 61 which deals with irrevocable transfer of assets would be wholly inapplicable because it is nobody's case that there is an irrevocable transfer of assets which would be wholly destructive of the premise on which s. 60 was being invoked by the department. Having regard to the legal provisions and the findings recorded in this case, it is clear that the income of the partnership firm earned from the construction contract relating to Yeshwant Stadium could not be assessed wholly in the hands of the assessee. Before we record our answers to the questions referred, it appears that the third question is not very happily framed. It appears that by posing question No. 3, the Revenue wanted to bring in a controversy that a procedural provision would not rule out the applicability of the ..... 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