FATEHCHAND MURLIDHAR AND ANR. vs COMMISSIONER OF INCOME-TAX, CALCUTTA

The Supreme Court held that under Section 23(5)(a) of the Income-tax Act, 1922, the income from a registered firm, which a partner shares with a sub-partnership, should be assessed as the income of the sub-partnership rather than the individual partner. The Court established that a sub-partnership creates a superior title that diverts income before it becomes the partner's income, thus allowing the sub-partnership to be assessed separately. The previous ruling in Mahaliram Santhalia v. Commissioner of Income Tax was overruled, affirming that the income of the partner can be treated as the income of the sub-partnership for tax purposes.