Overriding title over partnership income excluded the assessee's share from tax after transfer of the income-producing interest to a trust.

The assessee's share of profit from two firms, said to have been gifted to a trust, was held not taxable in her hands for assessment year 1971-72 because the earlier construction of the declarations showed transfer of the underlying income-producing interest, not merely the right to receive profits. On that basis, the asset generating the income stood transferred to the trust beneficiaries within section 60 of the Income-tax Act, and the income was diverted by an overriding title before reaching the assessee. The share income from the two firms was therefore not assessable in the assessee's hands.

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Issues: Whether the assessee's share of profit from the two firms, claimed to have been gifted to a trust, was taxable in her hands for assessment year 1971-72.

Analysis: The declarations relating to the assessee's interests in the firms had already been construed in earlier years to mean that what was transferred was not merely the right to receive profits, but the underlying interest that produced the income. On that construction, the asset giving rise to the income stood transferred to the beneficiaries of the trust within the meaning of section 60 of the Income-tax Act, and the income was diverted to the trust by an overriding title before it reached the assessee.

Conclusion: The share income from the two firms was not assessable in the assessee's hands and the question was answered in favour of the assessee and against the Revenue.

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