Law:

Section:

Section 4 of the Income-tax Act, 1961 - Association of persons - Assessable as - Assessment year 1967-68 - Assessee was partner in a firm as representative of HUF - Subsequently, partial partition in HUF took place which was accepted under section 171 - Even after partial partition HUF remained a partner of firm - No separate partnership deed was drawn up, thus, ITO treated assessee along with his grandsons as AOP - Whether on aforesaid facts, assessee could not be assessed in status of an association of persons (AOP), but that he should be assessed in status of an individual in respect of his individual portion of share of profits from firm - Held, yes FACTS The assessee was the Karta of a HUF. He, as Karta of the family, was a partner in a firm. On the first day of the accounting year, a partial partition of the business assets of the HUF was made and when this was represented before the ITO, the partial partition was accepted under section 171 and even after the partial partition, the HUF remained a partner of the firm. For the relevant assessment year, the ITO held that no separate partnership deed was drawn up but the partnership was governed by the earlier deed and so he treated the assessee along with his grandsons as an AOP. The AAC reversed the findings of the ITO and held that the assessee should be taxed as an individual. On revenue's appeal, the Tribunal confirmed the decision of the AAC. On reference: HELD The assessee could not be assessed in the status of an AOP, but that he should be assessed in the status of an individual in respect of his individual portion of the share of profits from the firm. Note: The decision was in favour of the assessee. J.P. Bhattacharjee and U. Baruah for the Respondent. JUDGMENT The following question of law has been deferred under sub-section (1) of section 256 of the Income-tax Act, 1961: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee, Shri Joysukhlal Sethia, cannot be assessed in the status of an association of persons, but that he should be assessed in the status of an individual in respect of his individual portion of the share of profits…

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