TaxTMI 
TaxTMI 
1968 (12) TMI 5
X X X X Extracts X X X X
X X X X Extracts X X X X
....under an agreement therefor. The assessee is a partner of Jyothikrishnan and Company, Erode, which has two others as partners thereto. The assessee is entitled to a one-third share of the profits in this firm. The assessee is also a partner in the firm, Erode Bleaching and Finishing Company, Erode, in which there are four others as partners. Jyothikrishna and Company, hereinafter referred to as " J " firm, found the wherewithal for the Erode Bleaching and Finishing Company, hereinafter called the " B " firm, and advanced moneys from time to time to provide a building and machinery for the " B " firm. Such advances amounted up to Rs. 25,000. This amount was treated, for mercantile purposes, as the capital of the assessee in the books of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he " B " firm. The Income-tax Officer rejected the return and treated the entire amount of Rs. 34,470 as the income of the assessee. The Appellate Assistant Commissioner as well as the Tribunal were of a different view and held : " . . . what was to be considered was not the income allocated to the share of a partner in a registered firm under section 23(5)(a), but his real income, and that the real income was what remained after deducting the amounts which might be said to have been diverted and never constituted his real income, that, therefore, the entire amount of Rs. 34,470 which was allotted to the assessee from the Erode Bleaching and Finishing Company did not represent the assessee's real income and that it was only a one third s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....come-tax Siddhi Vinayagar & Co. v. Commissioner of Income-tax and Murlidhbar Himatsingka v. Commissioner of Income-tax , urged that the agreement dated August 15, 1951, is a specific pointer to the arrangement between the partners of the " J " firm, whereby the income of the assessee has sloped down in accordance with its tenor. It is not the notional income, but the real income of an assessee that has to be reckoned for purposes of taxation. He thus supports the order of the Tribunal. The answer to the question referred to, which is obviously wide enough, depends upon the true scope of the word " income " which is exigible to tax. It is not every income of an assessee but the real income earned by him in the commercial and normal sense,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ency commission is made, agreed to or given on grounds of commercial expediency, simply because it takes place some time after the close of an accounting year. In examining any transaction and situation of this nature the court would have more regard to the reality and speciality of the situation rather than the purely theoretical or doctrinaire aspect of it. It will lay greater emphasis on the business aspect of the matter viewed as a whole when that can be done without disregarding statutory language. " Thus, it is by now well settled that income which is susceptible to tax is real income as is commercially understood. Even so, in ascertaining the real income of a partner in a registered firm under section 23(5)(a) of the Act, it is....
X X X X Extracts X X X X
X X X X Extracts X X X X
....idar who would be entitled to receive the profits from the other partners but for income-tax purposes it does not mean that it is the benamidar alone who can be assessed in respect of the income received by him. " The only citation relied upon by the revenue, K. A. Ramachar v. Commissioner of Income-tax, is indeed distinguishable. On the facts it appears that the assessee therein earned the income and devised a scheme for its division. It was a case of assignment of profits by the partner for a period of time. In fact, this decision was noticed when the Supreme Court laid down the dicta in Murlidhar Himatsingka v. Commissioner of Income-tax. In the instant case, the agreement envisages a clear and inflexible obligation on the part of ....