1980 (8) TMI 119

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....e firm of M/s. G. Konda Reddy & Co., and admittedly he was representing his family. In other words the profits arising from the partnership firm belong to the joint family consisting of himself and other members. On 31st March, 1973 there was a partial partition with respect to the capital standing in his name in the firm amongst the members of the family viz., himself, and his sons. The partition took place in the accounting year relevant to the asst. yr. 1973-74. A claim for recording partial partition was made and an order under s. 171(3) was passed by the ITO. The Karta continued to remain as partner in the partnership firm without any change being affected. In other words, there was no change vis-a-vis the partnership firm. But the cha....

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....per the oral agreement the consideration payable to you each year shall be in a sum equal to 1/3rd of my share income from the firm of M/s. G.Konda Reddy & Co., necessary adjustment shall be made in the books of the same. It was further agreed that you shall not be responsible for losses if any, that may come to my share in any year from the said firm. This arrangement shall remain in force till such time we determine". This agreement further shows that it came into effect from 1st April, 1973 and is, therefore, relevant for the asst. yr. Under appeal. The agreement further indicates that Yugendhara Rao should part with 1/3rd of his share of profit from the firm of M/s. G.Konda Reddy & Co. 3. The ITO did not accept the plea of the ass....

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....e case of CIT vs. Seth Gopaldas (HUF) (3). (2)There was only intention to divide capital and not profit sharing. (3)There was only application of income after it was earned and reference was made to the decision of the Supreme Court in the case of K.A. Ramachar & another. (4) (4)There is a sub-partnership which has come into existence by virtue of the agreement entered into by the parties after the partition. Support is taken for the proposition from the decision of the Gujarat High Court in the case of CIT vs. Mahendrasingh Mohansingh. (5) 6. So far as the first objection raised by the ld. Departmental representative is concerned we feel that there is no merit in this. The High Court has gone to the extent of saying that the fa....