1943 (6) TMI 2

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Lal Chand and his sons, together with Mithan Lal and Sundar Lal, were members of a joint Hindu family and converted themselves into the firm cited above, the three persons named being partners having respectively shares of seven annas, seven annas and two annas. This firm was registered and was assessed as such for the years 1936-37 and 1937-38. For the accounting period in question, 1938-39, a private arrangement was effected by which, in Lal Chand's own words as recorded by the Income-tax Officer and supported by the other two partners, "Mithan Lal would get ₹ 16,000/- per year for five years irrespective of firm's trading results and Sundar Lal would get ₹ 4,521/7-per year on the same conditions as in Mithan Lal....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... firm, in other words, exclusively for the purpose of such business. This, however, was not the case presented by Lal Chand himself in his statement. He claimed to be the owner of the firm for five years and represented the payments made as consideration for the total exclusion of the other two partners for this period, so that whatever profits or losses accrued during that period would be his and his alone. On this representation we have no alternative but to agree with the learned Commissioner of Income-tax, that the case is covered by the observations of their Lordships of the Privy Council in Tata Hydro-Electric Agencies Ltd. v. Commissioner of Income-tax, Bombay [1937] 5 I.T.R. 202 at p. 209: "In short, the obligation to make ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....yment would be income and as such taxable in the hands of the recipient. If Lal Chand himself had represented these payments as made in consideration of the use of the goodwill, premises and staff (as is now argued) instead of saying that they were made in consideration of his being" sole in charge and owner of the firm's profits and losses," it is possible that the case might be brought within the distinction between capital and income drawn by a Bench of this Court in Anant Ram Khem Chand v. Commissioner of Income-tax, Punjab [1937] 5 I.T.R. 511, but in view of the plea of the assessee himself, it is not necessary in this case to examine the rulings cited by Mr. Kirpa Ram Bajaj dealing with the meaning of the phrase "c....