Firm assessment bar limited, but minor partnership deed construction defeated clubbing of share income in father's assessment.

An unappealed firm assessment barred the assessee from collaterally disputing the firm's existence, constitution, and apportionment of its income, because the second proviso to section 30(1) gave a separate appeal on those matters. However, the bar did not prevent the assessee from contesting, in his personal appeal, whether his minor daughter was only admitted to the benefits of partnership. On the deed's construction, the minor was shown as a party with a fixed profit share and no clause limiting her to partnership benefits, so section 16(3)(a)(ii) did not apply. The minor's share income was therefore not includible in the father's assessment.

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Issues: (i) Whether the assessee was barred by the second proviso to section 30(1) of the Income-tax Act, 1922 from challenging, in his personal appeal, the inclusion of his minor daughter's share income on the footing that she was a partner in the firm; (ii) Whether, on a true construction of the deed dated 27 March 1957, Gulu was admitted only to the benefits of partnership so that her share income could be included in the assessee's assessable income under section 16(3)(a)(ii).

Issue (i): The unchallenged assessment of the firm precluded the assessee from disputing the existence or constitution of the firm and from questioning the determination or apportionment of the firm's income. The second proviso to section 30(1) gave a partner a separate right of appeal against those matters, and failure to exercise that right barred a collateral attack on the firm assessment in so far as it concerned the firm's constitution and apportionment.

Conclusion: The assessee was barred only to the extent of disputing the existence or constitution of the firm and the firm's assessment.

Issue (ii): For section 16(3)(a)(ii) to apply, it had to be shown that the assessee was a partner and that the minor had merely been admitted to the benefits of partnership. The deed showed the minor as a party, her share of profits was fixed alongside the adult members, she was signed for by the assessee as natural guardian, and the instrument contained no clause indicating that she was admitted only to the benefits of partnership. On the construction of the deed, the minor was not merely a beneficiary of partnership benefits, and her income could not be brought into the father's assessment under the provision.

Conclusion: The inclusion of Gulu's share income in the assessee's income under section 16(3)(a)(ii) was not justified.

Final Conclusion: The reference was answered partly in favour of the assessee: the challenge to inclusion of the minor's share income succeeded, while the broader challenge to the firm assessment remained barred as regards the constitution of the firm.

Ratio Decidendi: An unappealed firm assessment bars collateral challenge to the firm's constitution and apportionment, but it does not bar a personal assessee from contending, on construction of the partnership deed, that a minor was not admitted merely to the benefits of partnership for the purposes of inclusion of the minor's share income.

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