1976 (12) TMI 6

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ference, we are concerned with two firms. The facts pertaining to both are almost identical, as the Tribunal observes in its statement of case. The two firms are: M/s. Ramkumar & Co., a firm of Delhi, and M/s. Birla Cotton Mills Cloth Shop. M/s. Ramkumar & Co. was at all material times governed by a deed dated January 20, 1954, and there were 12 partners in the firm who were all members of either the Jalan family or the Kejriwal family, although they did not represent these families. On December 28, 1956, which date falls in the accounting year, the firm, Ramkumar & Co., constituted by the deed dated January 20,1954, was dissolved and a new firm formed on the next day, i.e., December 29, 1956. By deed of dissolution, 8 of the 12 partners, i....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Amarchand, Tolaram, Loknath and Champalal, four of the partners who retired from each of the two firms, adopted the device of substituting their minor sons and wife in the firm in their places in order to escape what the Income-tax Officer called " the proper incidence of taxation ". He laid emphasis on the fact that the two minor sons and Gita Devi did not invest any capital, nor did they contribute their labour to the working of the firm. It was also noticed that while the Jalan group as a whole had 11 annas and 3 pies in the old firm, that group as reshuffled had a share of 10 annas in the new firm. Considering these facts, it was held by the Income-tax Officer that factually the retiring partners transferred their shares of profit to th....