Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Diversion by of, overriding title - In profit and loss account of assessee-firm for relevant year certain sum was debited as a provision for use of right of one m, who was also a partner - There were some litigations between m and other partners of assessee which resulted in her exclusion as partner - Assessee claimed that said amount had been diverted by overriding title in m's favour - assessee had relied on section 37 of Indian partnership act, 1933 -Whether in view of fact that there was no credit balance in m's favour, assessee's claim had to be disallowed - Held, yes Facts In the profit and loss account of the assessee-firm a certain sum was debited as a provision for the use of the right or one M, who was also a partner, though there was no credit balance in favour of M. There were some litigations as between M and the other partners of the assessee which resulted in her exclusion as partner. The ITO held that the said provision made had not become a liability till the litigation was finally decided and, therefore, he added back the said sum. On appeal before the AAC, the assessee contended that the said provision had been diverted by overriding title created in M's favour by section 37 of the Indian Partnership Act, 1932 as well as by the terms of partnership deed and, therefore, the said income had ceased to be the assessee's income. The AAC, however, rejected the assessee's claim. The Tribunal also upheld the AAO's order. On reference: Held There was no use of the right of M by the assessee in the relevant year since there was no credit balance in her favour. Therefore, the claim based on section 37 was wholly misconceived. Accordingly, the Tribunal was right in disallowing the said claim. P.A. Bhat for the Applicant. K. Srinivasan and H. Raghavendra Rao for the Respondent. Order Shetty, J. - This is a reference under section 256(1) of the Income-tax Act, 1961. 2. The question of law referred is: "Whether, on the facts and in the circumstances of the case, the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492