Law:

Section:

WAHIDUDDIN, J.-This reference has been made at the instance of Messrs Merwan K. Irani and Messrs Merwan & Sons and arises out of the consolidated order dated 24th May 1962, in respect of the assessment years 1954-55 and 1955-56. During the two years in question Mr. M. K. Irani was a partner in two firms known as Messrs Asiatic Wine Merchants and Messrs Ritz Refreshment and Wine Stores having 4 annas share in the former firm and 1/3rd share in the latter. On 13th January 1954, Mr. M. K. Irani and his two sons K. M. Irani and A. M. Irani applied for registration of a firm composed of the said three partners for the charge year 1954-55 on the basis of a partnership deed dated 2nd April 1953, and operating from 1st. April 1953, in the name of Merwan & Sons. Under the terms of this partnership it was agreed that the two sons would work in the two principal firms in which their father was a partner on his behalf. In consideration of this it was agreed that the share of profit of the father would be divided half and half, the father would tare 8 annas out of the profits earned by him in the said firms and each son would get four annas share. The genuineness of this transaction has not been doubted by the Income-tax Appellate Tribunal and it is not disputed that the object of this new firm was that the sons were to assist the father in his work in the first two named firms. A renewal application for the firm of the father and sons was also filed in the charge year 1955-56. Both these applications were rejected by the income-tax Officer on the ground that the new firm had no business to carry on, the sons had not contributed any capital and although the father was to get Rs. 3,000 for managing the affairs of Asiatic Wine Merchants he allowed Rs. 29 ,600.to his two sons out of his share from the profits of the principal firms. After rejecting the applications by order dated 14th February 1958 for registration and renewal of registration the assessing officer included Mr. Merwan K. Irani's share of income from the two principal firms as a partner in his total income and assessed it accordingly.   The assessees challenged this order in appeal before the…