Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

1962 (1) TMI 75

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... was issued by the Government only in the name of G. Krishna Reddy. Without obtaining the prior approval of the Talukdar as required by section 14 of the Hyderabad Abkari Act, the partnership was entered into by the licensee with D.D. Italia. A return of O.S. ₹ 41,260 was made by the firm as the income liable to be assessed. G. Krishna Reddy also filed a return as an individual, showing half the income from the Abkari contracts as being the assessable income. The Income-tax Officer held that as the prior approval of the Talukdar was not obtained under section 14 of the Hyderabad Abkari Act, the firm had no legal existence and that G. Krishna Reddy was assessable to income- tax on the entire income made in respect of the Abkari contracts. On appeal to the appellate Assistant Commissioner, he took a different view. It was held that the assessee was liable to pay income-tax only on half the income earned from the Abkari contracts. When the matter was taken to the Appellate Tribunal, Hyderabad Bench, a statement was filed by D.D. Italia, where in the admitted his liability to be taxed for half of the profits from the excise contracts taken by the assessee, G. Krishna Reddy. Acting .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... is the Indian Income-tax Act, which treats the firm as a unit for purposes of taxation. Thus under section 3 of the Act the charge is imposed on the total income of a firm, the partners as such being out of the picture, and accordingly under section 23 of the Act, assessment will be on the firm on its total profits. Section 23(5) enacts an exception to this in the case of firms registered under the Act,.........Thus, registration confers on the partners a benefit to which they would not have been entitled but for section 26A.............. The distinction between an assessment of a registered firm and an unregistered firm is neatly pointed out by the Bombay High Court in In re Parekh Wadilal Jiwanbhai [1961] 42 I.T.R. 266, 274 in the following terms: In the assessment of the firm, if the firm is registered, the income of the firm is not taxed in the hands of the firm, but income is allocated among its partners according to their shares and is taxed in their hands in accordance with their shares in the income of the firm. On the other hand, if the firm is not registered, the entire income of the firm is taxed in the hands of the firm, as contradistinguished from its par .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... the present cases are other associations of persons and their income, profits and gains are assessable to tax, so far at any rate as the Indian income-tax is concerned. At page 430 they summed up and held that the words other association of persons in section 3 have to be construed in their plain ordinary meaning and not ejusdem generis with the word firm immediately preceding or the other words going before that word. They held that the profits earned by the association of persons should be taxed under section 3 of the Act. As to the meaning of the words association of persons within the meaning of section 3 of the Income-tax Act, there is a clear discussion by S.K. Das J. in Commissioner of Income-tax v. Indira Balkrishna [1960] 39 I.T.R. 546 (S.C.) . The learned judge observed at page 551 that an association of persons must be one in which two or more persons join in a common purpose or common action, and as the words occur in a section which imposes a tax on income, the association must be one the object of which is to produce income, profits or gains . This decision was followed by the Supreme Court in Mohamed Noorullah v. Commissioner of Income-tax [1961] 4 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... f the order of the Appellate Tribunal. The order of the Appellate Tribunal shows that the members approved the decision of the Appellate Assistant Commissioner. We have carefully looked into the terms of the order of the Appellate Assistant Commissioner and the question that was raised before him was whether half the profits arising from the Abkari contracts should be assessed to income-tax or whether the entire income arising from those contracts should be assessed in the hands of the assessee. The contention that was raised by the income-tax department was that the partnership should be ignored and that the assessee, i.e., G. Krishna Reddy, should be made liable for the tax on the entire profits. What is now contended is that as G. Krishna Reddy and D.D. Italia formed an association of persons within the meaning of section 3 of the Income-tax Act, G. Krishna Reddy is jointly and severally liable for the tax on the entire profits along with D.D. Italia. In support of the contention that G. Krishna Reddy is liable to pay tax on the entire profits, an additional ground is raised by the Income-tax department. The Appellate Assistant Commissioner clearly finds that in the present cas .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates