JUDGMENT

SABYASACHI MUKHARJI, J. :— This appeal by special leave is from the judgment and order of the Allahabad High Court dated 21st May, 1971 in Income-tax Reference No. 44 of 1965 (reported in 1971 Tax LR 1414).

2. This reference arose in respect of the assessment year 1962-63. One Prem Shankar was a partner in three partnership firms namely (1) M/s. Hari Shankar Gauri Shankar, (2) M/s. Hari Shankar Gauri Shankar Rice and Dal Mill and (3) Shri Ram Mahadeo Mills. The said Prem Shankar died on or about 24th July, 1959 leaving his widow Smt. Saroj Agarwal who is the assessee in the present appeal. After the death of Prem Shankar, Smt. Saroj Agarwal, the assessee herein, joined the partnership in which her husband was a partner before his death. It is necessary, in view of the contentions raised in this appeal, to refer to the partnership deed between the deceased husband of the assessee and his partners. The deed was dated 30th July, 1957. It described the three partners - one being L. Hari Shankar and the others being L Gauri Shankar and the third being L Prem, Shankar, the deceased husband of the assessee.

3. On behalf of the assessee it was stressed before us as was apparent from the deed that they all had the same address as described in the said partnership deed. This was pointed out to stress the point that they were members of a joint Hindu family. The recital of the said deed stated that they had been carrying on business since 9th July, 1956 and the partnership deed was executed on 9th July, 1956 and thereafter one Baijnath who was also a partner in the deed of July, 1956 had retired and the parties mentioned in the deed had decided and agreed to carry on business in partnership and the terms were reduced to writing. Clause 6 stated, inter alia, that the partnership was a partnership at will and the Indian Partnership Act, 1932 applied to it. Clause 7 stated that shares of the parties in the profits (or losses, if any) should be as under :-

First party - /5/3 in a rupee

Second party - /5/3 in a rupee

Third party - /5/6 in a rupee

4. The other clauses were the usual partnership clauses not very material for the present controversy.

5. The next deed of partnership was dated 12th August, 1959 which was executed by the present assessee and the wife of L Gauri Shankar, the second partner in the original deed and also Shri Hari Shankar, the first partner. This deed was executed on 12th August, 1959 while Prem Shankar had died on 24th July, 1959. All the executants to this deed were described as residents of the same old address as in the first mentioned deed indicating thereby that they came from a joint Hindu family residing at the same place. It recorded the death of Prem Shankar and he died leaving the present assessee as widow who had adopted one Sudhir Kumar Agarwal S/o L. Gauri Shankar, the second partner in the original partnership firm as a son on 27th July. 1959 i.e. three days after the death of Prem Shankar. The present assessee had joined the partnership and Gauri Shankar retired from the partnership and his wife Smt. Shakuntala had joined the partnership in his place and his minor son Ravi Agarwal under the guardianship of his father and Sudhir Kumar Agarwal under the guardianship of his adoptive mother, the present assessee, had been admitted to the benefits of partnership with such rights and liabilities as were provided under S. 30 of the Indian Partnership Act. The deed further recited that due to the above changes it had become necessary for fresh deed of partnership to be executed and set out the terms. Clauses (2) and (7), inter alia, provided :

"(2) That the profits and losses of the said firm shall be shared by the. partners and the minors since 27-7-59 as under : -

Profits Loss

(1) L. Hari Shankar Agarwal - /5/4 - /5/4

(2) Smt. Shakuntala Agarwal - /2/8 - /5/4

(3) Smt. Saroj Agarwal - /2/8 - /5/4

(4) Ravi Agarwal - /2/8 X

(5) Sudhir Kumar Agarwal - /2/8 X

(7) That partnership shall not dissolve on the deat