Partner's share of firm income taxable as business income, not property income, despite the firm's rental receipts.

A partner's share of firm income was held taxable in the partner's hands as profits and gains of business, not as income from property. The High Court reasoned that the partner does not become owner of the firm's specific assets, and the character of the firm's rental receipts does not continue unchanged in the partner's hands. The share income must be classified under the statutory heads of income within the Act, and it is not a separate category outside that scheme. The later provision in section 67(2) of the 1961 Act was not applied retrospectively to the assessments in question.

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Issues: Whether the assessee's share income from the partnership firm's property income was assessable as income from property or as profits and gains of business.

Analysis: The share of a partner in the firm's income does not retain the character of the firm's property income in the partner's hands so as to be assessed under the property head. A partner is not the owner of the specific assets of the firm, and the income received by him is received in his capacity as partner, not as owner of the property. The classification for computation of total income must be made under the statutory heads of income, and the share income of a partner is not a separate head outside the scheme of the Act. The governing principle is that partnership profits received by a partner are referable to business income, and the later provision in section 67(2) of the 1961 Act cannot be applied retrospectively to the assessments in question.

Conclusion: The assessee's share income from the firm was taxable as profits and gains of business, not as income from property, and the answer was in favour of the assessee.

Ratio Decidendi: A partner's share of the profits of a firm is assessable as business income in the partner's hands, even if the firm's income includes rental receipts from property owned by the firm.

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