Shroff Eye Centre, New Delhi vs Assessee on 1 March, 2012
In order to discharge the said obligation, the surviving
partners, while continuing the partnership under a fresh deed, voluntarily
provided for payment of the said lump sum amount to the widow. Accordingly,
the Hon'ble High Court held that the charge created under the subsequent deed
of partnership created voluntarily for a limited purpose, namely, fulfilling a
personal obligation of the partners. Had the condition not been fulfilled, the
surviving partners would not have been entitled to acquire the share of the
deceased partner in the goodwill of the firm. It was further held that the charge
created in the subsequent partnership deed cannot be held to have created an
overriding charge nor could it be held that as a result of such a charge the
income of the subsequent partnership has been diverted within the meaning of
the principles laid down in Raja Bejoy Singh Dudhuria [1933] 1 ITR 135 (PC).The
payments to be made to the widows were not dependent upon the profit or loss
of the firm but was an absolute obligation in the nature of a trust which the
widows could enforce, Hon'ble High Court concluded. But such are not the facts
and circumstances in the appeal before us. In the instant case, in terms of clause
13 of the partnership deed dated 1.4.2003, absolute obligation is cast on the
continuing Firm or the Partner/s who carry on the profession under the name
and style of SHROFF EYE CENTRE. In Subramaniam Brothers.(supra) the deed
of partnership imposed an absolute obligation on the surviving partners to realise
the commission that accrued up to the date of retirement and pay the same to
the retired partners. This obligation has to be discharged irrespective of the fact
11 ITA no.1560/Del./2012
whether the assessee-firm had made a profit or not and, equally the retired
partners had an enforceable right to receive the said commission. The obligation,
on the part of the assessee to pay to the retired partners arose upon the receipt
of the commission and the commission was earned for the work done prior to
their retirement. The substance of the entire transaction was that the assessee-
firm was collecting money as a trustee for and on behalf of the retired partners.
The assessee, as soon as the amount was collected, had to hand over the
money without anything further to be done to the retired partners. Accordingly,
Hon'ble High Court held that there was an absolute obligation imposed on the
continuing partners to hand over the commission to the retired partners and the
income was diverted by overriding title.