TMI Blog1968 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... nstance of the applicant has been made by the Income-tax Appellate Tribunal, Delhi. The assessments in respect of which appeals were pending before the Income-tax Appellate Tribunal relate to 1958-59 and 1959-60, the previous years ending with 31st March, 1958, and 31st March, 1959, respectively. The applicant is R. N. Oswal Hosiery and Mahabir Woollen Mills, Ludhiana, which formed itself into a partnership under a document of 6th of April, 1953, consisting of five partners, each entitled to one-fifth share. Another partnership consisting of the same five partners with the same shares was formed under an earlier partnership, deed of 7th of January, 1953, with the name and style of Messrs. Mahabir Wollen Mills, also at Ludhiana. Since 6th of April, 1953, the five partners have continued to remain as partners in both the firms. The nature of business of the two firms is somewhat different. Whereas the firm of R. N. Oswal Hosiery carries on the business of manufacture and sale of hosiery goods, Mahabir Woollen Mills carried on the business of manufacture and sale of R. D. woolen yarn. The two firms were registered separately upto the assessment year 1957-58. Both these firms were as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence on record to prove to the hilt that at least both the firms in the present case are one as a matter of fact". It has to be reiterated that the alternative argument presented before the Appellate Tribunal has not been referred to us as a question on which the opinion of this court is invited. For answering the first question in the reference, which is the abstract legal proposition with which alone we are concerned in this reference, some provisions of the Act way be noted. "Assessee", under sub-section (2) of section 2 has been defined to mean "a person by whom income-tax or any other sum of money is payable under this Act, and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him." Sub-section (6B) of the same section defines "firm", "partners" and "partnership" to have the same meaning respectively as in the Indian Partnership Act, 1932. A "person" under sub-section (9) of section 2 is defined to include a Hindu undivided family and local authority. Section 3 of the Act is the charging section which says: " Where any Central Act enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of its own liability and not on behalf of its partners." Thus, both the firm and its individual partners are assessable separately under section 3 of the Act. In both the Finance Acts of 1938 and 1959 paragraph D deals with the rates of income-tax which are payable in the case of every registered firm. On the first forty thousands total income there is no income-tax and on the next 35,000 it is at the rate of 5% and on the next 75,000 of total income the rate of income-tax is at the rate of 6% and so on. The point to be emphasised is that the firm as distinct from is partner, under the Act is made a unit of assessment. The case of the department is based fundamentally on the observations made by Sir John Beaumont, Chief Justice (Chagla J. concurring) in Vissonji Sons and Co. v. Commissioner of Income-tax. The proposition to which the learned Chief Justice subscribed was thus stated: "In law a firm has no existence independently of its partners, and if there are two firms consisting of exactly the same partners, the real position in law is that there is only one firm. It may carry on separate businesses, and may carry on those businesses in different names but in fact there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. v. Commissioner of Income-tax. In this judgment, Chief Justice Chagla questioned the validity of the general proposition laid down by Sir John Beaumont in Vissonji Sons and Co. v. Commissioner of Income-tax : " With great respect to the learned Chief Justice, the actual question that he had to consider in that reference was whether a certain item which the assessee claimed as a bad debt was a bad debt or not, and the learned, Chief Justice disposed of that reference by coming to the conclusion that this question was really a question of fact and the only question of law that arose was whether there was sufficient evidence to justify the finding of fact by the Tribunal. " The particular observation to which reference has been made, according to Chief Justice Chagla, was a mere obiter. After discussing the Calcutta case in In re Martin Co., and also a decision of the Lathore High Court in Krishna Ginning and Pressing Factory v. Commissioner of lncome-tax, Chief Justice Chagla reached the following conclusion: "Therefore, we disagree with the Tribunal in the view it has taken of the law and we are of the opinion, that there is nothing in law to preclude common partners co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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