TaxTMI 
TaxTMI 
1990 (7) TMI 191
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....ther Yashwant A. Khare was shown as 14 per cent. The capital initially contributed by various partners was indicated in para 5 of the said deed. A. Y. Khare, the appellant herein, had contributed Rs. 7000 and A. Y. Khare had contributed Rs. 14,000. This partnership was assessed upto the asst. yr. 1969-70. On 1st July, 1969 there was a partial partition of the HUF of Y. A. Khare, Karta, his son Anant Y. Khare and his wife Sumati Yashwant Khare. In terms of such partial partition the 14 per cent share of Y.A. Khare was divided between himself, his son and his wife equally. His son A.Y. Khare received on such partition share of 4.67 per cent which was stated to be received by his smaller HUF which consisted of himself and his wife. An order recognising this partition was passed by the ITO Assessment XI, Nagpur, on 8th Jan., 1975 for the asst. yr. 1970-71 and 1971-72. The share of Y.A. Khare representing himself and the two partitioned members of his family, namely, A.Y. Khare (HUF) and Smt. Sumati Y. Khare was increased to 24 per cent w.e.f 1st Oct., 1971. A.Y. Khare in his individual capacity continued to have 7 per cent share in the firm. Thus from 1st Oct., 1971 the shares fo the t....
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....2) S.Y. Khare (HUF) 6% (3) Smt. Sumathi Y. Khare 8% In the partnership deed drawn on 5th July, 1978 the entire 29 per cent was shown as a share of Anant y. Khare and the capital contributed by him was shown at Rs. 1,16,000. A memorandum of understanding was drawn on 1st July, 1979. This memorandum of understanding was between Anant Y. Khare and his mother Smt. Sumati Y. Khare. It recorded all the facts as enumerated above and stated, inter alia, in the preamble portion as under: "And whereas consequent to the induction of M/s Khare & Tarkunde Private Limited in the said Partnership firm by virtue of Deed of Partnership dt. 5th July, 1978, Shri A.Y. Khare for and on behalf of the said co-claimants became entitled to 29 per cent of the right, title and interest in the partnership firm M/s Khare and Tarkunde". The memorandum of understanding in effect laid down the interest in the partnership firm represented by A.Y. Khare and the late Y.A. Khare from time to time, in cl. 1 as under: "1. It has been agreed and understood by the parties hereto and hereby recorded that the interest in the partnership firm M/s Khare and Tarkunde represented by Mr. A.Y. Khare an....
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....nly the factum of such partial partition, but the factum of representation by Y.A. Khare and his son A.Y. Khare in the firm on behalf of the three co-claimants for the asst. yr. 1979-80 and 1980-81 by an order dt. 27th Nov., 1984 under s. 16(3) of the WT Act. Similarly the Income-tax and Wealth-tax assessments of Sumati Y. Khare have been completed by the ITO, Circle I(4) and WTO, Circle I(3) on the basis of the partial partition of the HUF of Y.A. Khare in 1969 and the fact that the co-claiments were represented by Y.A. Khare first and thereafter by A.Y. Khare in the firm was also accepted in the assessment of Mrs. Sumati Y. Khare in the firm was also accepted in the assessment of Mrs. Sumati Y. Khare in the asst. yr. 1979-80. According to Shri Dewani the capital shown against the name of A.Y. Khare in the firm as it was constituted on 13th Dec., 1977, after the death of Shri Y.A. Khare which stood at Rs. 1,08,500 as indicated in para 6 of that partnership (reproduced herein above) in two debts, capital of Rs. 84,000 belonging to late Y.A. Khare which in term belonged to the members of the partitioned family. cls. 5 and 6 of the partition deed dt. 1st July, 1969 read as under: ....
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....ia (1981) 22 CTR (Bom) 262 : (1982) 137 ITR 137 (Bom); and there decisions of the Supreme Court is: CIT vs. Sitaldas Tirathdas (1961) 41 ITR 367 (SC); Charandas Haridas & Another vs. CIT (1960) 39 ITR 202 (SC); State Bank of Travancore vs. CIT (1986) 50 CTR (SC) 290 : (1986) 158 ITR 102 (SC). 4. It appears that the claim for separate assessments on the ground of an over-riding title created by the memorandum of understanding was not accepted either by the assessing authority or the first appellate authority mainly on the ground that there was neither a pre-existing legal obligation nor a sub-partnership. The CIT(A) in para 5 rejected the claim of the appellant for the asst. yr. 1981-82 in the following words: "5. The appellant's claim for excluding a portion of the share of profit arising to him under an agreement of partnership deed can be considered only if there is either a sub-partnership or there are circumstances indicating diversion by over-riding title. (Murlidhar Himmat Singka and Another vs. CIT (1966) 62 ITR 323 (SC) : Bejoysingh Dudhuria vs. CIT (1933) 1 ITR 135 (PC). The true test is whether the amount sought to be deducted in truth never reached the ....
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....d to the 29 per cent indicated above. 6. Replying to the argument of the Departmental Representative, Shri Dewani pointed out that the assessment made in the case of A.Y. Khare, HUF, for the asst. yrs. 1981-82 and 1982-83 were substantive assessments and the assessments made in the case of Smt. Sumati Y. Khare for the asst. yr. 1981-82 was substantive and for the asst. yr. 1982-83 was protective. 7. We have carefully considered the submissions made by both the parties. In the course of proceedings we called upon Shri Dewani to produce the original paper of the memorandum of understanding which has been so produced and examined. A Xerox copy of the same has been filed. The memorandum of understanding dt. 1st July, 1979 is a stamped document and the stamp paper was purchased on 23rd Oct., 1978 and the document was drawn on 1st July, 1979. We have no reason to hold that this document is not genuine or does not constitute contemporaneous record. We find that the appellant in a letter addressed to the IAC of Income-tax, Range III, on 25th Feb., 1984 has stated, inter alia, as under: "I am a partner in the firm M/s Khare and Tarkunde as individual as well as the Karta of my HUF.....
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....uent assessment years also the revised 29 per cent share has been taken by the Department in the hands of the individual of A.Y. Khare. Similarly in wealth-tax assessments upto 1978-79 the various shares as declared were assessed in the respective hands of the co-claimants, namely, Y.A. Khare (Indl.), A.Y. Khare (HUF), Smt. Sumati Khare and A.Y. Khare (Indl.), but from the asst. yr. 1979-80 31 per cent share is assessed in the hands of A.Y. Khare (Indl.) and from the asst. yr. 1980-81 onwards 29 per cent share has been taken in the hands of the A.Y. Khare (Indl.). We have now to decide whether the memorandum of understanding entered into on 1st July, 1979 has the effect of providing an overriding title on the shares earned by A.Y. Khare in the partnership which share as per the latest document of partnership is shown as 29 per cent. 8. The concept of real income was discussed by the Bombay High Court in the case of Ratilal B. Daftari vs. CIT. In that case the Bombay High Court held that in the case of assessment of a registered firm what was to be considered was not the income allocated to his share by employing the machinery of s. 23(5)(a) but his real income; and that real inc....
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....ition of the partner vis-a-vis the other partner or partners. The income-tax law before the partition took note, factually, of the position of the Karta, and assessed him not as partner but as representing the HUF. In doing so, the income-tax law looked not to the provisions of the Partnership Act, but to the provisions of Hindu law. But once the family had disrupted, the position under the partnership continued as before, but the position under the Hindu law changed. The decision, in our opinion, would appear to support the stand of the appellant on the present facts of the case. A similar situation arose in the case of CIT vs. M.D. Kanoria. In that case also the Karta of an HUF consisting of himself, his wife and two minor sons was a partner in the firm for and on behalf of the family. There was a partial partition of the assets of the family invested in the firms, and the memoranda attached to the partition deeds contained agreements between the members that the assessee was to remain a partner in the firms but the profits falling to the share of the assessee were to be the profits of the members of the family "severally in their own respective individual right and interest" ....