Law:

Section:

Section 247, read with section 185, of the Income-tax Act, 1961 [Corresponding to section 30, read with section 23(5), of the Indian Income-tax Act, 1922] - Appeal by partner - A firm was constituted with one 'S' and assessee's wife 'C' as partner - Firm was registered under Partnership Act, 1932 - However, its application for registration under 1922 Act was refused on ground that alleged partnership between 'C' and 'S' was not genuine and that real partner was not 'C' but assessee - Department acting under section 23(5) of 1922 Act determined income of assessee from firm and included it in his individual assessment - Assessee objected to it on grounds that he was not a partner in business of firm and that he was not granted any opportunity to contest finding of Department, that he was a real partner in firm - Relying on second proviso to section 30(1) of 1922 Act, Tribunal rejected assessee's contention - Whether if provisions of section 23(5) of 1922 Act applied, there must be in existence a firm as defined in 1922 Act, which meant a firm constituted under Indian Partnership Act and once it was held that said firm did exist as a firm constituted under Partnership Act, only persons who could be treated as partners would be those who were partners for purposes of Indian Partnership Act - Held, yes - Whether therefore, it must be held that partner in firm was 'C' for purposes of Indian Partnership Act even though income received by her could be taxed in hands of assessee on finding that income really belonged to him and not 'C' - Held, yes - Whether assessee who was not a partner for purposes of Partnership Act, could not, therefore, be treated as a partner and orders passed in proceedings for assessment of firm could not be binding on him so as to shut out his right to claim that income should not be assessed in his hands by applying provisions of proviso to section 30(1) of 1922 Act - Held, yes FACTS In the firm, 'S' and assessee's wife 'C' were partners. The application of the said firm for its registration was rejected on the finding that the alleged partnership between 'S' and assessee's wife 'C' was not genuine and the real partners were the assessee and…

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