TMI Blog1970 (4) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... l Nadar and Shanmughavel Nadar. S. P. Mohan, a minor, had been admitted to the benefits of the partnership, his share in the net profits being 1/5th. The deed of partnership provided that the partnership could not be dissolved before August 31, 1955. But it was open to the partners to continue the partnership 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act ? " The High Court answered that question in favour of the revenue. The real point in controversy between the revenue and the assessees is whether the profits earned in the business should be considered as profits earned by an " association of persons " or whether it should be considered as having been earned by individuals. 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apter III of the Act and the provisions laid down with regard to computation of the income-tax must be carried out ; section 41 will come into play after the income has been so computed. In support of this contention, he relied on the decision of the Bombay High Court in Commissioner of Income-tax v. Balwantrai Jethalal Vaidya, which 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 " o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is to produce income, profits or gains. It is true that in the instant case before the receivers were appointed, one of the erstwhile partners objected to the continuance of the partnership. But there is nothing in the record to show that he objected to the continuance of the business. All the same we shall assume that he 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counsel such was not the position in the present case. For the reasons already stated, we see no merit in that contention. We have earlier come to the conclusion that the business was continued with the consent of all the owners. Hence, for the purpose of this case, it is not necessary to go into the question as to what would 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 profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
