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TMI Blog1976 (3) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... dissolving this co-partnership between surviving partners ; in such an eventuality the co-partnership business may be carried on between the surviving partners and the heir/heirs, legal representative/representatives, assign/assigns, etc., of the deceased and/or retired partner or if mutually agreed upon between the surviving partners and heirs, etc., of the deceased and/or the retiring partner with outsiders also. " Yudhisthir Lal died on the 18th December, 1967, and the partnership firm closed its accounts on the same date, i.e., 18th December, 1967. A new deed of partnership was executed on the 11th January, 1968, with retrospective effect from the 19th December, 1967. Under this new deed, three minor sons of Yudhisthir Lal were admitted to the benefits of the partnership with 14% share each in the profits of the firm. Clause 6 of the new deed provided as follows : " That the capital of the partnership shall be the amounts as will be found to the credit of the parties hereto of the first, second, third parts and the said Yudhisthir Lal Agarwalla since deceased. " In the relevant assessment year, i.e., 1969-70, Bhagwati Debi Agarwalla, the widow of Yudhisthir Lal, filed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of Yudhisthir Lal. On these facts the Tribunal concluded that the minors were admitted to the benefits of the partnership because they were heirs and successors of Yudhisthir Lal and as the capital of the Hindu undivided family continued to be invested in the partnership free of interest. The Tribunal further found that this continued use of the capital of the Hindu undivided family as capital, in the partnership was to the detriment of the family. The Tribunal concluded that the minor's share of the income of the partnership firm was the income of the Hindu undivided family. From the decision of the Tribunal the following questions have been referred to us at the instance of the assessee under section 256(1) of the Income-tax Act, 1961: " 1. Whether, on the facts and in the circumstances of the case, and having regard to the legal position, the Tribunal was justified in holding that the three minors were admitted to the benefits of the partnership on account of their being heirs or successors of late Y. L. Agarwalla and for the interest-free use of the capital of the assessee-Hindu undivided family ? 2. Whether, on the facts and in the circumstances of the case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undivided family received either a remuneration or commission or a salary from the partnership firm in which the capital of the Hindu undivided family was contributed in one form or another, could such remuneration or salary or commission be assessed in the hands of the Hindu undivided family. The dispute before us is entirely different. The minor sons of Yudhisthir Lal are being given a share of profits of the partnership and not any remuneration or salary or commission for services rendered. Mr. Bhattacharjee also relied on a decision of tire Supreme Court in the case of Commissioner of Income-tax v. Rajas than Mines Ltd. [1970] 78 ITR 45 (SC) for the proposition that even accepting the primary facts found by the Tribunal the court could reject the conclusions arrived at by the Tribunal from such facts. On the strength of this decision Mr. Bhattacharjee invited us to reject the conclusion of the Tribunal in the instant case that the income of the partnership firm falling to the share of the minors was assessable income in the hands of the Hindu undivided family. On careful consideration of the submissions of Mr. Bhattacharjee we are unable to accept the same. In the very de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be any dispute that the share of the income of the partnership to the benefit of the minors is not a remuneration. Therefore, we can apply the other tests which have been laid down by the Supreme Court. It appears that the income received by the minors can be said to be directly related to the utilisation of the capital of the Hindu undivided family which has continued to remain in the partnership after the death of Yudhisthir Lal. It also appears that no interest being payable to the Hindu undivided family on account of such capital remaining in the partnership firm the Hindu undivided family is suffering a detriment. The capital of the Hindu undivided family having been retained by the partnership which has carried on business with such capital, it can also be said that the income which the partnership firm was earning was aided and assisted by the use of such funds. On the primary facts as found by the Tribunal all these tests, as laid down by the Supreme Court, are satisfied. Mr. Bhattacharjee has emphasised that no direct nexus has been found between the capital of the Hindu undivided family in the partnership and the admission of the minors to the benefits of such f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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