TaxTMI 
TaxTMI 
1985 (8) TMI 44
X X X X Extracts X X X X
X X X X Extracts X X X X
...., was a registered firm consisting of two partners: (1) Shri Rai Bahadur Rameshwar Nathany, who died on January 18, 1957, and had 12 annas share; and (2) Shri Ram Kumar Agarwal, who had three annas share. One anna share was kept for charity. Shri Rameshwar Nathany was the karta of a Hindu undivided family, which was known as M/s. Baldeo Das Rameshwar and in the firm, he was a representative of the Hindu undivided family up to September 21, 1943. A complete partition of the Hindu undivided family by the court was made on September 21, 1943, by a consent decree. Even after September 21, 1943, Shri Rameshwar Nathany continued as a partner in the firm of M/s. Duduwala & Co. with the same share, in the capacity of the representative of the following five persons, as a partition by metes and bounds of the share of the karta could not be made: (i) Himself; (ii) Smt. Muniya Devi (wife); (iii) Shri Satya Narain Nathany (son); (iv) Shri Hari Ram Nathany (son); (v) Shri Mahaveer Prasad Nathany (son); and (vi) Shri Shree Gopal Nathany (son). The Department did not accept the claim of the assessee for registration on the ground that the application for registration should have been signed b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e persons; (2) that in any case the Appellate Assistant Commissioner ought to have directed that the assessment should be made by the Income-tax Officer on behalf of the five beneficiaries in the hands of the receiver. The Tribunal accepted the application of the assessee, vide its order dated August 31, 1978. It observed as under: " We are of the view that in the matter before us also even though one assessment may be called for being made on the assessee in the status of an 'association of persons', the tax liability to be determined would have to be to the same extent and in the like manner as in the case of the beneficiaries directly or on the erstwhile partners through their representatives under the provisions of section 41 in respect of the first two years (1960-61 and 1961-62) and under section 161 in respect of the later four years." According to it, no tax was to be levied on the income determined in the case of M/s. Duduwala & Co. by treating it as a single unit and that the tax was to be worked out in the hands of each beneficiary and further that the recovery of the whole amount of tax was to be made from the assets of M/s. Duduwala & Co. and that the demand wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e upon and recoverable from the person represented by him. (1A) Notwithstanding anything contained in sub-section (1), where any income in respect of which the person mentioned in clause (iv) of sub-section (1) of section 160 is liable as representative assessee consists of, or includes, profits and gains of business, tax shall be charged on the whole of the income in respect of which such person is so liable at the maximum marginal rate: Provided that the provisions of this sub-section shall not apply where such profits and gains are receivable under a trust declared by any person by will exclusively for the benefit of any relative dependent on him for support and maintenance, and such trust is the only trust so declared by him. Explanation.-For the purposes of this sub-section, 'maximum marginal rate' shall have the meaning assigned to it in Explanation 2 below sub-section (3) of section 164. (2) Where any person is, in respect of any income, assessable under this Chapter in the capacity of a representative assessee, he shall not, in respect of that income, be assessed under any other provision of this Act." While construing section 161 of the Act, it is to be remembere....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5, but it was open to the partners to continue the partnership or enter into a fresh partnership. A suit was instituted on September 17, 1956, by one of the partners in the civil court for dissolution of the firm with effect from August 31, 1956, and for taking accounts. On September 21, 1956, the court appointed three receivers, two of whom were partners and the third was an advocate. Since the business had been stopped from September I to 21, 1956, the court directed the receivers to reopen and conduct the snuff business for the purpose of winding up, subject to the terms, inter alia, that the receivers could carry on the business normally, that the profits earned, if any, shall be treated as an asset of the firm subject to be divided between the parties in the manner set out in the partnership deed, and that the receivers will pay every month certain specified amounts to the partners. A commissioner was appointed by the court for taking accounts and for arranging the sale of the business as a going concern. The question arose whether the profits could be assessed in the hands of the receivers in the status of an association of persons. The Supreme Court held : (1) that the fact ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me extent" has been used like the one used in section 161(1) of the Act, their Lordships found that the consequences are three-fold: (1) that there would have to be as many assessments on the trustees as there are beneficiaries with determinate and known shares, though for the sake of convenience, there may be only one assessment order specifying separately the tax due in respect of the wealth of each beneficiary ; (2) that the assessment of the trustee would have to be made in the same status as that of beneficiary whose interest is sought to be taxed in the hands of the trustee ; and (3) that the amount of tax payable by the trustee would be the same as that payable by each beneficiary in respect of his beneficial interest, if he were assessed directly. It was observed by their Lordships that the first two consequences were recognised and laid down in N.V. Shanmugham & Co.'s case [1971] 81 ITR 310 (SC), and so far as the third consequence was concerned, Padmavati Jaykrishna Trust v. CWT [1966] 61 ITR 66 (Guj), Trustees of Putlibai R.F. Mulla Trust v. CWT [1967] 66 ITR 653 (Bom) and Chintamani Ghosh Trust v. CWT [1971] 80 ITR 331 (All) were approved. At page 593 of the report, P. ....