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TMI Blog1970 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... p or enter into a fresh partnership on fresh, terms and conditions. On September 17, 1956, Ramiah Nadar filed a suit in the City Civil Court, Madras, for the dissolution of the partnership with effect from August 31, 1956, and for taking of accounts. He also applied for the appointment of a receiver to take charge of the business. On September 21, 1956, the court appointed three receivers two of whom were the partners of the firm, namely, Ramiah Nadar and Murugavel Nadar, and the third was an advocate by name Ram Mohan. The business of the firm had been stopped from September 1, 1956, to September 21, 1956. The court directed the receivers " to reopen and conduct the snuff business for the purposes of winding up, with powers to realise the outstandings and discharge the dues of the firm " subject to the following among other terms. Clause 4 : The receivers can carry on the business of the partnership normally. Clause 6 : All parties to have access to the books of the firm and to the business premises. Clause 7 : All parties are entitled to get information relating to the conduct of the business from the receivers. Clause 8 : The profits if any earned from September 1, 1956, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The receivers appointed by the court were merely the representatives of the real owners of the business, i.e., the erstwhile partners of the firm. The primary liability to pay the tax due was that of the real owners. The tax may be levied and recovered from the receivers under section 41(1) of the Act. To borrow the expression from the Income-tax Act, 1961, they are only representative assessees. The fact that there were three receivers did not make them an association of receivers. The three receivers jointly represented the real owners. The circumstance that there were three receivers was wholly irrelevant for the purpose of the assessment. There was no question of assessing the receivers as an " association of persons ". The real question is whether the persons whom the receivers represented constituted an " association of persons ". Further, in respect of business profits, all assessments to tax are done under section 3 read with section 10 of the Act. Section 3 imposes the charge and section 10, to the extent relevant for our present purpose, provides that tax shall be payable by the assessee under the head " profits and gains of business " in respect of the profits or gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch decision has been approved by this court in C. R. Nagappa v. Commissioner of Income-tax. Proceeding further the counsel urged that the assessment of the receivers should have been on the same basis as the erstwhile partners of the firm would have been assessed in respect of the profits in question. According to him, the business in question could not have been conducted by the erstwhile partners as an " association of persons ". He urged that the erstwhile partners of the firm were fighting amongst themselves ; some of them wanted to carry on the business while one of them wanted to close down the same. Hence, they could not have carried on the business as an " association of persons ". He urged that an " association of persons " as used in section 3 of the Act means an association in which two or more persons voluntarily join in a " common purpose " or " common action ". He further urge that in a business said to be carried on by an " association of persons ", there must be a unity of control and unity of management ; as no such unity existed amongst the erstwhile partners of the firm, it cannot be said that the receivers represented an " association of persons ". 7. We are u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not want at that stage that the business should be continued. But in fact the business was continued in pursuance of the orders of the court. All the owners of the business including the persons who objected to the continuance of the business were given, month by month, some amounts from the proceeds of the business. It was not said that any of them declined to receive the same. That means all of them acquiesced in the continuance of the business. Each one of the assessees wants to share the profits earned on behalf of all of them but when it comes to the question of paying tax, they want to deny that the business was conducted on behalf of all of them. It is true that considerations of equity are irrelevant in interpreting taxing provisions but while considering the question who carried on a business, the course of conduct of the concerned parties is relevant. On the facts proved, it must be held that in law the erstwhile partners of the firm carried on the business through their representatives. 9. In Mohamed Noorullah v. Commissioner of Income-tax this court had to consider whether the assessment in that case was rightly made on an " association of persons ". Therein, O, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld have been the position if the business had been continued without the consent of all the owners. The facts of this case directly fall within the rule laid down by this court in Commissioner of Income-tax v. Buldana Distt. Main Cloth Importers Group. The facts of that case were : In 1945, the Deputy Commissioner of Buldana evolved a scheme for the distribution of cloth in his district and, with the sanction of the C. P. Government, appointed a group of four persons as sole agents for the import of cloth from mills in various places in India and for its distribution to retailers. For different periods the group which imported cloth was differently constituted. H. & Co., which was a common member, maintained the books relating to the business. Every time there was a change in the constituents of the group, a separate set of books was maintained and the profits from those enterprises were divided between the various persons who formed the group at the material time. The Appellate Tribunal found that the import and distribution of cloth was done on a joint basis, the purchasers were joint, so were the sales and the profits were ascertained on a joint basis and then distributed accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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