9911796707
TMI Blog1968 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessed separately uptill the assessment year 1958-59, when the Income-tax Officer for the first time came to the conclusion that there being common partners of both the firms, the two units constituted one assessable entity for purposes of income-tax. The assessment was made on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 enacts that income-tax shall be charged for any year at any rate or rates tax at that rate or those rates shall be charged for that year in accordance with, and subject to the provisions of this Act in respect of the total income of the previous year of every individual, Hindu undivided family, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istered 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 is only one firm in law." It appears that the earlier observations of a Special Bench of Chief Justice Rankin, Ghose and Buckland JJ. in In re Martin & Co. were not brought to the notice of this Bench. In remitting the case to the Commissioner of Income-tax, it was observed by Chief Justice Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sider 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 constituting two separate firm for the purpose of the Income-tax Act. Whether there are two firms or only one firm is a question of fact which can only be determined by the Tribunal itself. " The emphasis, according to Chief Justice Chagla, was to be on the nature of the two businesses of which the same set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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