Sub-partnership share income remains taxable despite family partition; double taxation plea rejected and deduction recognised before distribution.

Share income from three firms, initially arising to an individual and later routed through a sub-partnership after family partition, remained taxable in the hands of the sub-partnership. The arrangement did not displace the tax incidence attached to the registered firm, and the amount taxed at the sub-partnership level was allowable as a deduction before distribution among the coparceners. The plea that this resulted in double taxation was rejected, and the assessment against the assessee was upheld.

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Issues: Whether the share income from the three firms, when first consolidated in a sub-partnership and then distributed among the coparceners, could escape taxation on the ground of double taxation.

Analysis: The share income originally arose to Shri M.S. Manvi in his individual capacity, but after family partition it was treated as belonging to all coparceners and was deliberately consolidated through a sub-partnership before distribution. The arrangement did not avoid the tax incidence attached to the registered firm, and the amount taxed in the hands of the sub-partnership was allowable as a deduction before allocation to the partners. The plea of double taxation was therefore untenable.

Conclusion: The contention of double taxation was rejected and the assessment in the hands of the sub-partnership was upheld against the assessee.

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