Profits accrue to a taxpayer only after the right of the taxpayer to the income accrues or arises.

Judgment

SHAH, J. : The respondent was a Hindu undivided family consisting of Ashokbhai the manager-his wife Shobhana and his minor son Chirag. Ashokbhai was a partner in a firm styled Messrs Amrit Chemicals with a share of five annas in every rupee in the profit and loss. It is common ground that the beneficial interest in the profits of the firm falling to the share of Ashokbai belonged to the undivided family. The year of account of the Hindu undivided family was the Samvat year - 1st of Kartika to 30 Ashwin. The year of account of Messrs Amrit Chemicals was the calendar year according to the Gregorian calendar.

2. By deed dated November 12, 1955, the Hindu undivided family was disrupted, and the property of the family was divided. The following are the material clauses of the deed of partition :

4. There is joint family property of the joint family of Seth Ashokbhai Chimanbhai of the First Part. Out of that we are making a partial partition of the property as hereinafter stated, particulars hereof are as follows :-

(a) in the Partnership Firm in the name of the Amrit Chemicals five As. share out of sixteen annas in the rupee including goodwill together with the benefit and liability in respect of the profit and loss relating to five annas share in a rupee of sixteen annas made by the said firm from 1-1-1955 of the value of about Rs. 70,001.

8. The Partnership Firm of the Amrit Chemicals has been in existence from 1-1-1946 and a Deed of Partnership dated 14-8-1946 has been made in respect of the said Partnership and according to the said Deed there it a share of five annas in a rupee a sixteen annas in the profit and loss of the said Firm in the name or Seth Ashokbhai Chimanbhai.

Seth Ashokbahi Chimanbhai has become the full owner of the said share henceforth and all the rights under the said Deed of Partnership are to be enjoyed by Seth Asokbhai Chimanbhai party of the First Part himself. Similarly, any liability under the said Deed is to be borne and discharged by Seth Ashokbhai Chimanbhai party of the First Part.

The account of the profit and loss of the said Partnership Firm from 1-1-1955 remains to be made up and on the making of such accounts whatever profit or loss the Partnership Firm may have made thereout Seth Ashokbhai Chimanbhai shall be the full owner and responsible for a five annas share out of the rupee of sixteen annas."

3. In proceedings for assessment for 1955-56 - the corresponding previous year being October 27, 1954 to November 14, 1955 - the Hindu undivided family-hereinafter called the assessee contended that the share in the profits of Messrs. Amrit Chemicals for the calendar year which accrued on or after December 31, 1955 belonged to Ashokbhai in his individual capacity and was not liable to be included in the taxable income of the assessee, because it had been declared under the partition deed to belong exclusively to Ashokbhai as from January 1, 1955, and that in any event since the firm made up its accounts at the end of the calendar year, the assessoe had no interest in the share of profits for the calendar year 1955,which accrued at the end of that year to Ashokbhai in his individual capacity. The Income-tax Officer ordered that Rs. 21,051 received by Ashokbhai as five annas share in the profits of the firm be included in the computation of the total income of the assessee. In appeal the Appellate Assistant Commissioner held that on November 12, 1955 Ashokbhai ceased to represent the Hindu undivided family and the share of profits received from the firm had to be apportioned between the assessee and Ashokbhai. This order was confirmed by the Income-tax Appellate Tribunal.

4. The Tribunal submitted a statement of case on the following question to the High Court of Gujarat;

"Whether on the facts and circumstances of this case the 5 annas share of the income of Amrit Chemicals or any part thereof for the year 1-1-1955 to 31-12-1955 accrued to the assessee and whether it could be charged in its hands ?"

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