TMI Blog1996 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983 : Though served, nobody appears for the respondents. This appeal is preferred against a decision of the Full Bench of the Andhra Pradesh High Court in CIT v. G. Parthasarathy Naidu and Sons [1980] 121 ITR 97. The question which was referred for the opinion of the High Court under section 256(1) of the Income-tax Act, 1961 "whether on the facts and in the circumstances of the case, G. Parthasarathy Naidu and Sons and Messrs. Sri Lakshmi oil and Flour Mills can be treated as two separate firms and distinct assessable entities ?" The Full Bench overruled an earlier decision of the same court in Addl. CIT v. M. Venkata Narasimha Rao and Co. [1976] 104 ITR 28. The Full Bench enunciated as many as ten principles as flowing from the seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm is genuine or bogus or benami is a pure question of fact. But whether two or more partnerships or firms constituted under different deeds of partnership are, in reality, only one partnership or not is a mixed question of fact and law. (8) The prime guideline to determine this latter question is the cumulative effect or the totality of all the material factors relating to the object and intendment of the partnerships and businesses, their nature, character and identity, coupled with the factum or otherwise of interlacing and interlocking of funds between the two firms. (9) The very question as to whether there was really one partnership or two different assessable entities being two separate distinct partnerships unconnected with each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rship deed of Sri Lakshmi oil and Flour Mills makes it specific that the business of this partnership shall not be deemed as part and parcel of the assessee-partnership constituted under the deed of partnership dated October 1, 1968. This clause establishes that the intention of the partners in constituting the second firm was to make it a separate, distinct firm unconnected with the assessee-firm which had already come into existence on October 1, 1968. The registration under the Income-tax Act granted by the Income-tax Officer to Sri Lakshmi oil and Flour Mills was not cancelled and the same was allowed to continue as a registered firm. The two firms had been constituted under two separate deeds of partnership. There was no interlacing or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l refer. Having decided the legal identity of the assessee that it is a partnership firm, he will then turn to the tax law and apply its relevant provisions for assessing the partnership income. The Kerala General Sales Tax Act contains no provision which bears on the identity of a partnership firm. Therefore, recourse must be had for that purpose to the partnership law alone. Where it is claimed that there are not one but two partnership firms constituted by the same persons and carrying on different businesses, the assessing authority must test the claim in the light of the partnership law. It is only after that question has been first determined, namely, whether in law there is only one partnership firm or two partnership firms, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the profits will be divided, and several other considerations which constitute such an organic relationship. It is permissible to say that a partnership agreement creates and defines the relation of partnership and, therefore, identifies the firm. If that conclusion be right, it is only a further step to hold that each partnership agreement may constitute a distinct and separate partnership and, therefore, distinct and separate firms. That is not to say that a firm is a corporate entity or enjoys a juristic personality in that sense. The firm name is only a collective name for the individual partners. But each partnership is a distinct relationship. The partners may be different and yet the nature of the business may be the same, the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion arrived at by the Full Bench on the facts of that case appears to be correct. Accordingly, this appeal is dismissed subject to the above observations and clarifications. There will be no order as to costs. Civil Appeals Nos. 448-52 of 1984: These appeals are preferred against the judgment of the Karnataka High Court answering the following question in the negative: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that there were no two separate firms in law and the business of both GM and GFC have to be taken as belonging to the same four partners constituting a single firm ?" The assessment years concerned herein are 1965-66 to 1969-70. The question, in short, was whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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