9911796707
TMI Blog1982 (6) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was made effective from 1st October, 1963. Under the said partnership deed, the assessee stepped into the shoes of Narottamdas and became entitled to 31% share in the profits and losses of the firm. Narottamdas had executed a will on 15th January, 1963, cl. 6 whereof, when translated into English, reads as under : " I have got twenty-one (or thirty-one) naye paise share in the partnership firm of Messrs. Narottamdas Chandulal Bros., Managing Agents of the Ahmedabad New Cotton Mills. This share may be held by my wife after my death on the condition that out of the annual income arising out of the said share, fifty per cent. income should be distributed equally between my four daughters Nandini, Panna, Pratixa and Mamta as responsibility of Jyotsna of income arising out of the said partnership and my wife Jyotsna may take remaining fifty per cent. of the income. " It may also be mentioned that at the date of execution of this will, deceased Narottamdas did not have a son. He died without a male issue on 30th September, 1963. That is why under cl. II of the partnership deed dated 5th January, 1958, his wife, Jyotsna, the assessee before us, stepped into his shoes and wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, 1963, which governed the relationship between the assessee on the one hand and her other partners on the other, and, therefore, in his view the entire income to the extent of 31% share in the profits of the firm was assessable in the hands of the assessee. The Incometax Appellate Tribunal (Ahmedabad Bench) which heard the three appeals filed by the assessee repelled the contention advanced on behalf of the assessee that since the Revenue had, in the previous years, accepted the assessee's contention that half of the 31% share belonged to the four daughters by virtue of cl. 6 of the will, the Revenue was debarred on the principle of res judicata to take a somersault and now contend that even the said 50% share out of the 31% share in the partnership-firm profits was liable to be assessed as income in the hands of the assessee. The Tribunal also came to the conclusion that the will created a moral obligation so far as the assessee is concerned and that moral obligation was converted into a legal obligation by the execution of the declaration of 7th December, 1966, and, therefore, the assessee was entitled to a deduction of 50% out of the 31% share in the profits of the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assumption that question No. 1 is answered against the assessee ; so far as question No. 2 is concerned, we answer the same in the negative, that is, against the Revenue. We answer question No. 4 in the affirmative and questions Nos. 5 and 6 in the negative, that is, against the Revenue. We may state that we were told at the bar that question No. 6 was formulated at the instance of the Revenue. We will now proceed to give our reasons in support of the aforesaid findings. There is no dispute that the deceased, Narottamdas, had 31% share in the profits and losses of the partnership under the deed of partnership dated 5th January, 1958. On his death, since he died without a male issue, the assessee stepped into his shoes by virtue of cl. 11 of the said partnership deed. It, therefore, became necessary to admit the assessee as a partner to the extent of the share of Narottamdas in the fresh partnership deed executed on 23rd December, 1963, which was no doubt given effect to from 1st October, 1963, that is, from the day next to the date of demise of Narottamdas. Narottamdas was entitled in law to deal with the 31% share in the partnership in any manner he liked because he had a disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Jyotsna to disburse 50% of the 31% share of the partnership profits to the four daughters was a legal obligation which, could be enforced by the daughters in a court of law should the assessee fail in her duty to disburse the income from the partnership to the extent of 50% to the four daughters in equal shares. As stated earlier, so far as the assessment years 1,964-65 to 1966-67 are concerned, the asseessee's plea of exclusion of 50% of the 31% in the partnership income on the basis of el. 6 of the will was allowed by the Revenue. In the subsequent assessment year 1967-68 the assessee donated or gifted the remaining 50% of the 31% share which accrued to her under cl. 6 of the will to Nandini, Panna, Pratixa and Mamta Trust created under the deed of 5th October, 1966, by Shri Bipin Chandulal Zaveri. This donation or gift came to be recorded in a declaration executed on 7th December, 1966, the relevant part whereof reads as under: "That I am a partner holding 31 nP. share in the firm of M/s. Narottam Chandulal and Brothers, managing agents of the Ahmedabad New Cotton Mills Company Ltd., Ahmedabad. That I, being desirous of assigning the benefits of 1/2 share of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sferred or gifted by the donation referred to in the declaration of 7th December, 1966, is only that 50% of the 31% share in the profits of the partnership which the deceased, Narottamdas, bequeathed to his four daughters in equal shares under cl. 6 of the will dated 15th January, 1963. In other words, according to the Tribunal, the identity of the 50% of the 31% share in the profits of the partnership given by way of gift as recited in the declaration dated 7th December, 1966, was the same share which Narottamdas gave to his four daughters under cl. 6 of the will. According to the Tribunal, a moral responsibility was created under cl. 6 of the will which was converted into a legal responsibility by the declaration of 7th December, 1966, in so far as that very share which Narrottamdas bequeathed to his four daughters under cl. 6 of the will was concerned. We have already pointed out earlier that the obligation cast by cl. 6 of the will on the assessee, Jyotsna, to disburse the 50% of the income derived under the 31% share in the partnership to the four daughters was a legal obligation which the four daughters could enforce in a court of law, should the assessee be found to have def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays that the assessee created an overriding title in favour of the trust in which her four daughters are beneficiaries by the declaration of 7th December, 1966, in furtherance of the obligation created by cl. 6 of her husband's will dated 15th January, 1963. In our opinion, the gift or donation, whereof a recital is made in the declaration of 7th December, 1966, stands on a separate or independent footing and has nothing to do with the bequest made in favour of the four daughters by the deceased, Narottamdas, under cl. 6 of his will. We are, therefore, of the opinion that there was no material with the Tribunal to jump to the conclusion that the declaration of 7th December, 1966, was in respect of the very same 50% share bequeathed by deceased, Narottamdas, in favour of his four daughters under cl. 6 of his will dated 15th January, 1963. There was no justification for the Tribunal to reach the conclusion that by the execution of the declaration of 7th December, 1966, the assessee merely converted her moral obligation under the will into a legal obligation in respect of the very same 50% share out of the income derived from the firm. The effort on the part of Mr. Shah was to explain ..... X X X X Extracts X X X X X X X X Extracts X X X X
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