Law:

Section:

Income-tax--- ----Income---Firm---Diversion of income by overriding title ---Sub-partnership in respect of a partner's share---Sub-partnership formed in November, 1971---Share allotted to sub-partner not assessable in hands of partner after November, 1971. The assessee was a partner in a firm with a two annas share. She executed a trust deed, dated March 23, 1971, settling Rs.4,01,000 out of her capital standing in the firm on trust. In the year, 1971, it was decided that there should be a sub-partnership between the assessee and the trust by which the two annas share in the firm was to be shared by herself and the trust, The Income-tax Officer included the entire profit from the two annas share of the firm in the assessment of the assessee. The assessee claimed that only 50 per cent of the share should be included in her hands and the other 50 per cent was the income of the trust. This plea was rejected. In appeal, the Appellate Assistant Commissioner held that the sub-partnership was in existence in November, 1971, though the partnership deed was executed on December 31, 1971. It was further found that after the said date half of the share was diverted at source and belonged to the trust. He directed that the profit arising after the end of November, 1971, should be governed by the sub­ partnership, and the profit prior to that was properly assessable in the hands of the assessee. The Tribunal affirmed this decision. On a reference: Held, that the Tribunal was justified in holding that the income of the assessee would be governed by the sub-partnership, which came into existence at the end of November, 1971, and there was no diversion of 50 per cent share income of the said firm at source from the beginning of the year 1971. JUDGMENT At the instance of the assessed, the Income-tax Appellate Tribunal, "A" Bench, Patna, has referred the following questions of law for decision of this Court: "(1) Whether, on the facts and under the circumstances of the case, the Tribunal was right in holding that there was no diversion of the 50 per cent. of the share income at source from the beginning of 1971? (2) Whether, on the facts and under the circumstances of the case,…

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