Law:

Section:

Section 184 of the Income-tax Act, 1961 [Corresponding to section 26A of the Indian Income-tax Act, 1922] - Firm - Position prior to 1-4-1993 - Assessment years 1941-42 and 1942-43 - Assessee was manager of HUF consisting of himself and his three sons - Assessee's case was that after eldest son's separation he found it difficult to manage a grain shop and, thus, he admitted 'M' as partner in said shop who was earlier working as employee of shop - It was, thus, claimed by assessee that income from grain shop should be excluded from his assessment and should be assessed separately as income of firm - Revenue authorities as well as Tribunal rejected assessee's claim holding that alleged firm was not a genuine firm - On instant reference, it was noticed that although 'M''s share in profits of firm was almost equal to amount which he was drawing as salary yet it did not matter - Further, though 'M' was not to contribute anything in firm yet there was nothing unusual in arrangement of that kind in case where an employee was being taken into partnership - Besides, eventhough no notice of partnership was given to any of shop's constituents, it was not necessary in petty concern of that kind - Whether, in aforesaid circumstances, it could be concluded that there was not sufficient material before Tribunal for finding that firm in question was not a genuine firm - Held, yesFACTSThe assessee was the manager of a joint Hindu family consisting of himself and his three sons. The family owned cloth shops and a grain shop.While eldest son managed the two family concerns at Gondia he was assisted in the conduct of the business by an employee 'M'. The assessee's case was after eldest son's separation he found it difficult to manage the grain shop at Gondia as he was living with his family at Phulgaon and hence he admitted M as a partner in the grain shop with effect from 31-10-1940, as evidenced by the registered instrument of partnership dated 5-2-1941. It was therefore contended by the assessee on the footing of this instrument that the grain shop at Gondia was no longer a family concern but that of a firm consisting of himself and M and consequently the grain shop income…

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