' JEEVAN REDDY, I.-The assessee is a partnership firm, Messrs Abdul Kareemia and Brothers. The partnership consists of five partners, who are brothers. Originally the partnership was formed in 1963 under a partnership deed, dated 27th March, 1963. At that time, the fifth brother, was a minor and was admitted to the benefits of the pannership. After the fifth brother became a major be opted to continue as partner and accordingly a partnership deed, dated 6th November, 1964 was executed by all the five partners brothers.
2. Three house properties were purchased in the names of these brothers. The first sale-deed is dated 12th August, 1960 while the second and third sale-deeds are dated 6th February, 1966 and 3rd July, 1967. The total consideration under these three sale-deeds is Rs, 1,10,000. The cost of the properties was debited in the books of the firm, though they were purchased in the joint names of the five partners. Right from 1963, these properties were being treated as the properties of the firm, whereupon the firm was claiming depreciation as well. The income from these house properties was treated as the income of the firm and was divided among the partners along with the other partnership income. On 31st March, 1969 entries were made in the firm's books of accounts purporting to transfer these three houses to the five brothers individually, each to the extent of one- fifth share. On that basis, a claim was made for the assessment year 1969-70 that the income from these house properties cannot be included in the firm's income and that income from these houses should be treated as the income of the brothers in the proportion of one-fifth each. It was rejected by the Income-tax Officer and that order became final. Even for the subsequent years the properties were treated as the firm's properties and assessed as such.
3. For the assessm ent year 1973-74, the assessee again raised a contention that the income from these properties cannot be treated as the income of the partnership firm, but must be treated as individual income of the five brothers. The Income-tax Officer rejected the same holding that these properties appeared as the assets of the firm right up to 1969 and that the partnership firm has been claiming depreciation on the value of the building utilized and that the plea of the assessee put forward on the basis of the entries dated 31st March, 1969 was already rejected for the assessm ent year 1969-70, which order has become final. The Income-tax Officer further observed that even repairs for these houses were undertaken by the firm and therefore these houses must continue to be treated as the firm's properties. On appeal, the Appellate Assistant Commissioner, reiterated the Income-tax Officer's finding holding that mere entries in the account books of the firm cannot have the effect of transferring the firm's properties to the individual partners. He also took note of the fact that on 1st April, 1973 the partners executed a deed dividing these house properties among themselves in specified shares, and observed that at any rate up to 31st March, 1973 these properties were being treated as the firm's properties and must be assessed as such in the hands of the assessee. When the matter came before the Tribunal, it agreed, with the Appellate Assistant Commissioner. It found that the cost of the properties was debited in the books of the firm though they were purchased in the names of the five partners and that the properties were acquired with the funds of the partnership firm. The Tribunal further found that though the properties were purchased in the names of the brothers, they were always treated as the firm's properties until 1st April, 1973 when the partition deed was executed among the partners. The Tribunal posed the question "The short question before us is whether the properties admittedly once owned by the firm as such ceased to be so owned by it by reason of the entries made in the account books of the firm" and answered it in the negative following the decision of the Allahabad High Court in Ram Narain and Brothers v. Commissioner of Income-tax U. P.(1) Whereupon the assessee applied to the Tribunal to refer the following {{FOOT NOTE}}
(1) 1969 73 ITR 423. {{FOOT NOTE}} question for the opinion of this Court under section 256 of the Income-tax Act : "whether, on the facts and circumstances of the case, the Tribunal is right in concluding that the properties purchased in the names of the partners belong to the firm, whether a separate instrument in writing is necessary when properties purchased stand in the names of the partners."
4. The Tribunal allowed the said application and made the reference. But the questions referred by it are different from the question which the assessee asked to be referred. The questions now referred to us are the following : "(I) Whether the properties treated as owned by the firm as such ceased to be so owned by it by reason of the entries made in the account books of the firm ?
(2) Whether, even though the property was treated as owned by the firm as such, can it be held to have been owned by its partners, with definite and ascertainable shares, so as to constitute themselves into an association of persons so that the share of each partner in the income from the property is includable in his total income ?"
5. The questions referred to us are premised on the assumption that the properties once belonged to the firm. The question posed is whether by making entries in the account books of the firm, these properties can be treated to have become the properties of the partners in their .Individual capacity, thereby ceasing to be the firm's properties. Mr. S. Dasaratharami Reddy, learned counsel for the assessee, concedes if the properties are taken as having belonged to the firm at one time and if they are sought to be transferred to the partners in their individual capacity a registered document is necessary as held by the Allahabad High Court and other High Courts and that merely by making entries in the firm's account books, the firm's properties cannot be converted into individual properties of the partners. But what Mr. S. Dasaratharami Reddy argues is that the very assumption underlying the Tribunal's judgment and the questions referred to this Court, is wrong.
His case is that these properties were purchased in the individual names of the five partners and that the sale-deeds do not in any manner show that they were purchased for or on behalf of the firm and that there is nothing to show that these properties became the properties of the partnership firm.
6. Firstly we are not prepared to allow the counsel to shift the very basis of the questions referred to us, The questions referred to us are premised on the assumption that the properties once belonged to the firm and our answer is solicited on the question whether by making entries in the firm's account books these properties can be treated as the separate properties of the partners. The second question also is based on the same premise namely, whether the property owned by the firm can at the same time be taken to be owned by the partners in definite and ascertainable shares. It is well. Settled that if a partner wants to put his property into the partnership firm, a registered conveyance is not necessary. It is equally well-settled by the decision of the Supreme Court in Narayanappa's case AIR 1966 SC 1300 that a partner cannot at any given point of time claim any of the firm's properties to be his notwithstanding the fact that at one time they belonged to him and that he had put the properties into the assets of the firm. It has been found by the Tribunal and also the lower authorities as fact that right from the inception of the firm, these properties were treated as the firm's properties and the firm claimed depreciation on these properties also and that the income from these properties was treated as the firm's income and accordingly divided between the partners. Another significant finding is that the properties were also acquired with the funds of the firm and the cost of these properties was debited in the books of the firm. From all these circumstances, the departmental authorities and the Tribunal concluded and in our opinion rightly that these properties became and were treated as the properties of the firm. Once that is so, it is not disputed that by merely making entries in the account books of the firm, the firm's properties cannot become and cannot be treated to have become the separate properties of the partners. Similarly so long as they are the firm's 'properties no partner can predicate that he owns a particular property or that he owns a specified share in the particular property or properties, as the case may be.
'7. For the above reasons, both the questions, referred to us are answered in the negative and in favour of the Department and against the assessee. No costs.