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TMI Blog1981 (9) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... ee for the period he was a partner in the firm is to be excluded from the total income of the assessee is in law justified ? " The assessee who is an attorney and an advocate of this court, was partner in the firm of M/s. Bhaishanker Kanga and Girdharlal, attorneys-at-law, from 1st March, 1961, till 31st May, 1968, under a deed of partnership dated 25th April, 1961, varied from time to time, the last of such variation being made on 16th March, 1968. He retired from the firm on 31st March, 1968. The accounts of the firm were maintained on cash or receipt basis, its accounting year being the calendar year from 1st January to 31st December. Under cl. 10 of the deed of partnership dated 16th March, 1968, which was in operation at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of transfer. A copy of the said indenture was endorsed by the assessee to the said firm. During the calendar year 1970 the said firm made recoveries of professional fees due from its clients for a period prior to calendar year 1970. The statement of account for the calendar year 1970 in respect of the said recoveries was finalised on 23rd August, 1971, and the assessee's share therein as per the deed of partnership was worked out at Rs. 21,439. Against the said amount that had come to the share of the assessee and against the amount that may come to the share of the assessee thereafter from the firm, the firm paid to the assessee two sums of Rs. 10,000 on 15th January, 1971, and Rs. 15,000 on 19th November, 1971, with the excess to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Tribunal, in appeal against the said order of the AAC, disagreed with the findings of the AAC and the ITO. Before the Tribunal the assessee had contended that the right to receive his share of the professional fees due to the firm while he was a partner was merely an actionable claim, capable of being assigned, and under the said indenture of settlement dated 17th December, 1970, he had transferred the said actionable claim irrevocably in favour of his sons and, therefore, the amounts recovered from M/s. Bhaishanker Kanga and Girdharlal had ceased to be his income. The Tribunal accepted the contention of the assessee. It firstly held that in this case the assessee's right to share in profits was an actionable claim, capable of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d right or source of income to his sons irrevocably under the said indenture of settlement dated 17th December, 1970, and his sons alone were thereafter entitled to receive the said amount and not the assessee. The said amount was, therefore, not liable to be assessed in the hands of the assessee as his income. A reference in that connection may be made to the decision of this court in the case of Surajratan Damani v. CIT [1977] 106 ITR 576, relied upon by the learned counsel for the assessee. In that case the assessee and his brother had entered into an agreement with a company, F, whereunder the assessee was entitled to receive from F-company 7 1/2% of the managing agency commission receivable by F, from another company S. F-company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he managing agency commission was vested for ever in the two daughters in equal shares absolutely. The effect of the gift deed was to transfer the source of income itself before the income either accrued or arose. In fact, after the deed of gift was executed and intimation thereof was given to F, the assessee would have no cause of action to institute any suit to recover any share in such commission. As the source of income was really transferred to the daughters before the income had accrued in any of the accounting years, such income could not be regarded as the income of the assessee for any of the relevant assessment years. The ratio of the said decision squarely applies to the facts of this case. In this case the right to the share i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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