1982 (4) TMI 147

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....tnership in respect of interest in capital, profit, etc., of a firm known as Bharat Sandal Oil Distilleries. Formerly, the partners of the assessee-firm were members of a HUF and were represented by Sri R.M. Kandaswamy in the firm of Bharat Sandal Oil Distilleries (hereinafter referred to as the "larger firm"). Subsequently, there was a partition and Kandaswamy continued to be partner in the larger firm which was constituted by a deed dated 11-6-1965. 2. In the case of the assessee, the share income from the larger firm was taken at Rs. 1,65,906 on a provisional basis. The assessee had claimed before the ITO that the assessee was not liable to pay firm's tax in respect of such income included in its total income because the larger firm h....

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.... share profits only constitutes a partnership between the parties to the agreement. If, therefore, several persons are partners and one of them agrees to share the profits derived by him with a stranger, this agreement does not make the stranger a partner in the original firm. The result of such an agreement is to constitute what is called a sub-partnership, that is to say, it makes the parties to its partners inter se ; but it in no way affects the other members of the principal firm." His contention was that since a sub-partnership is only a partnership within a partnership, it is part of the same entity, viz., the larger partnership, and when the larger partnership paid firm's tax, the sub-partnership was not liable to pay firm's tax ....

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.... entity, though it was not a separate legal person or a juridical entity. 6. We have considered the rival submissions. In the decision of the Single Member of the Jaipur Bench referred to above, we find that certain statutory provisions relating to the relief to be given in respect of tax paid by a registered firm in allocating the share income, etc., as obtaining in the Income-tax Act were apparently not placed before the Bench. We may also state that the learned counsel for the assessee very fairly placed before us an order of the Hyderabad Bench of the Tribunal in IT Appeal Nos. 1383 to 1385 of 1979 dated 4-8-1980 wherein disposing of an application under section 154 on a similar point when a similar contention was raised by the asses....

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....nly provisional share income.) So, it is clear that the Legislature itself was aware of the fact that the registered firm had to pay tax and the share income when it was apportioned would again be taxed in the hands of the particular partner. Therefore, the Legislature provided for such relief as it considered appropriate, viz., that the firm's tax should be deducted before any apportionment is made. What is taken in the hands of the assessee-firm is only the apportioned share income. Therefore, the statutory relief under section 67(1)(a) is already given. It is not as if the entire share of the assessed total income of the larger firm has been bodily lifted into the hands of the assessee. Such relief as the Legislature considered appropria....