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TMI Blog1978 (4) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... on in partnership, but under the same name of Oriental Art Glories. Both the partners had equal share in the profit and loss. The partnership was stated to be for a period of three years. On 31st March, 1969, the firm was dissolved. Hasin Ahmad went out and the business was taken over by Hafiz Shaukat Hussain. On 31st March, 1969, the state of affairs appears to have been that it suffered a loss of Rs. 8,287.92. Each of the partners undertook to share the loss, i.e., of Rs. 4,143.96. Subsequently, they entered into a written agreement indicating the extent of the loss and also stating that by this time the likely profits and premium on earned entitlements and release orders granted against exports made and the amount of drawback during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness by party No. 1 aforesaid'." Opposite party No. 2 was Hasin Ahmad. They consequently repelled the submission made on behalf of the assessee that this payment represented business expenditure or diversion of income by an overriding title. At the instance of the assessee, the Tribunal has referred for our opinion the following question of law : " Whether, on the facts and circumstances of the case, the Tribunal was right in holding that clause 10 of the partnership deed prevented the outgoing partner from claiming any share in the benefits earned on account of exports for the period of partnership and in holding on this ground that the payment was in the nature of diversion of income after it had been earned ? " Cls. 8 to 11 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also to the payment of the capital due to him. Cls. 10 and 11 were inserted to cover the situation that if Hasin Ahmad withdraws from the partnership during the period of three years, the business shall be continued in sole proprietorship of party No. 1. This eventuality was specifically provided in cl. 11. Cl. 10 was put in in order to effectuate the purpose of cl. 11. Cl. 10 prevented Hasin Ahmad from interfering with the business of the firm after his retirement from it. Various ways were indicated in cl. 10, namely, that he was to have no right to stop payments to the bankers or other parties or to stop mail in the post office or the receipt of any benefits of licence or entitlement of exports, etc. The last part of cl. 10 relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. The learned counsel appearing for the assessee had argued before the Tribunal that though the firm was maintaining mercantile system of accounting, yet for entitlement purposes it had followed the cash system and on that basis the assessee paid the amount that was received by him during the year under consideration. This argument has not been dealt with specifically by the Tribunal. There is no finding whether the general system of accounting was mercantile or the assessee had in fact followed the cash system for the entitlement purposes and what was the fate of this argument, The Tribunal merely proceeded on the basis of its interpretation of cl. 10 which, as observed above, was not correct. In the circumstances, the Tribunal will ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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