JUDGMENT
A.L. Bahri, J.
1. The Income-tax Tribunal, vide order dated July 27, 1985, has referred the following question for the opinion of this court under Section 256 (1) of the Income-tax Act:
“Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the income from the property known as ‘Amritsar Cotton Mills’ should be excluded from the assessment of the assessee for the assessment years 1976-77, 1979-80 and 1980-81 ?”
2. At this stage, it may be noticed that the question referred to above, relates to the assessment years 1976-77, 1979-80 and 1980-81. The assessments were made on the basis of the decision given for the assessment
year 1975-76. In the cases of assessments for 1971-72 and 1975-76, the
Tribunal has referred the questions of law for opinion to this court which
has also been disposed of, vide a separate order. Since, in those cases,
reference was made, in the present case also, the question was framed as
above and referred to this court for opinion. In the partnership firm, the
following were the partners with their respective shares : . ‘
(1) Harbhajan Singh–five annas share representing the Hindu undivided family of Sobha Singh Harbhajan Singh.
(2) Jairam Singh–five annas share representing the Hindu undivided family of Sobha Singh Jairam Singh.
(3) Kirpal Singh–three annas share in individual capacity.
(4) Joginder Singh –three annas share in individual capacity.
3. In 1954, there was some change in the partnership. Mohan Singh, son of Jairam Singh, was inducted as a partner. The profit sharing ratio of Shri Jairam Singh representing his Hindu undivided family was reduced to two annas and Mohan Singh had a share of three annas. This partnership continued up to November 20, 1968, when Harbhajan Singh died. Kirpal Singh then stepped into his shoes and as karta of the Hindu undivided family, Sobha Singh Harbhajan Singh, he became entitled to a five annas share apart from a three annas share in his individual capacity. The business of Cotton Ginning Mills was discontinued on June 30, 1970. A regular dissolution deed was executed on August 31, 1973.
4. The claim of the assessee throughout had been that, on the death of
Harbhajan Singh, there was a dissolution of the partnership and the assets
were divided. In such a case, there was no question of transfer of shares to
the other partners requiring any deed to be executed or registered. There
was distribution of the cash amount as well as the building value. The
Department did not raise any dispute regarding the distribution of the cash
amount. However, regarding the share of the building, the dispute was
raised. The amount of the share of the building was being included in the
return of the assessee which, according to the assessee, was to be treated
as that of a Hindu undivided family.
5. In Income-tax References Nos. 1 and 2 of 1986 (CIT v. Sobba Singh
Jairam Singh (No. 1) [1990] 183 ITR 148 (P & H)), relating to the
assessment years 1971-72 and 1975-76, decided today, it has been held
that the majority decision of the Tribunal that, on dissolution, there was no
change in the character of the assets of the Hindu undivided family
(partner) and the same was to be excluded from the return of the asses
see, was correct, and the question framed in the present case is answered
in favour of the assessee for the reasons recorded therein. The reference is
disposed of as above.