TaxTMI 
TaxTMI 
1981 (12) TMI 44
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....allow the other remaining partners to use such intangible assets were allowed payments of Rs. 96,000. According to the Commissioner, the provisions of the Indian Partnership Act clearly shows that the minors had no right in the assets of the firm and as such the ITO has committed an error in law in treating them as entitled to payment of fixed sums every month for the user by the remaining partners for their share in the assets of the firm. When the minors do not have any share in the property, the question of user of such share by the remaining partners and payment of fixed monthly amount for such user could not arise. Finally the Commissioner held that the ITO has committed an error in allowing deduction of Rs. 96,000 per year. The Commissioner held that the order passed by the ITO was prejudicial to the interest of revenue and, therefore, he set aside the ITO's order and directed him to frame a fresh assessment in accordance with law. Being aggrieved, the assessee came in appeal before us, 2. The contention of the learned counsel for the assessee, Shri Raiyani, was that the Commissioner has erred in holding that the three minors had no right in the assets of the firm and also....
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...., 15 per cent and 15 per cent, respectively. According to the terms of the dissolution deed, the minors were entitled to the share in the assets of the firm in proportion to the ratio in which they shared profits in the firm ; one of the clauses in the dissolution deed mentions that as it is not possible to ascertain the value of intangible rights such as goodwill, quota rights, selling agency rights and other business connections, the retiring minors, in consideration of their agreement to allow the remaining partners to use intangible assets, the firm will pay to the minors the following amounts: 1. Jayesh B. Mistry Rs. 4,000 per month 2. Lata B. Mistry &nb....
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....-------- The payment of the amount involved is not in dispute. The controversy centres around the issue whether the minors had any right in the assets in question before the dissolution of the firm. The assessee cited the following observations of the various High Courts and the Supreme Court : 4. In CIT v. Khetan & Co. [1962] 45 ITR 170, their Lordships of the Calcutta High Court observed as under : "For instance, sub-section (2) gives such a minor a right to the share of the property and of the profits of the firm. The words 'as may be agreed upon' in sub-section (2) mean agreed upon between the adult partners, because a minor cannot agree." According to the assessee, these observations suggest that the share in the property is the same as that of the share in the profits. 5. In Chiman Lal Umaji & Sons v. CIT [1975] 98 ITR 306, their Lordships of the Madhya Pradesh High Court observed as follows: "As pointed out by the Privy Council in Sanyasi Charan Mandal v. Krishna-Dhan Banerji AIR 1922 PC 237---the right of a minor admitted to the benefits of a partnership is merely to participate in the property of the firm after its obligations have been discharged." Ac....
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.... property of the firm. 8. In our view, the above decisions of the various High Courts and the Supreme Court are not directly on the issue but observations have been made and are relevant in the sense that they provide guidelines to ascertain the status and position of the minor in the firm and to determine as to what rights he has in the firm in view of the provisions of section 30 read with section 48 of the Partnership Act. In our view, the scheme of section 30 is to give some benefit to the minor or to put him in privileged position in the firm so that his liability in the firm may not extend beyond the share of the minor in the firm. The firm was dissolved and the minors have allowed their rights of assets goodwill, etc., to be used by the continuing partners for which they were entitled under the provisions of section 48 of the Partnership Act (sic). The provisions of section 48(b)(iv) postulates that the residue, if any, shall be divided amongst the partners in the proportion in which they are entitled to share profits. Sub-section (2) of section 30 of course mentions that the share of the property and profit should be such as agreed upon but sub-section (4) clarifies the ....