Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home List
← Previous Next →

1972 (1) TMI 107

waminathan And K. Ramagopal JUDGMENT RAMANUJAM J.- As these two tax cases are interconnected, they are dealt with together. The assessee in T. C. No. 17 of 1965 is one U. G. Krishnaswami Naidu who is the aunt's son of one Ramaswami Naidu, the assessee in T. C. No. 66 of 1965. The substantial question that has been raised in both the cases is as to whether the business carried on by U. G. Krishnaswami Naidu was his own or whether it was the business of Ramaswami Naidu. Ramaswami Naidu was a partner in a firm called " G. Krishna and Company " which was acting as the managing agent of a textile mill called " Kadiri Mills Ltd. ", hereinafter referred to as the mills, which went into production in or about February, 1950. Ramaswami Naidu had an eight annas share in the managing agency firm, " G. Krishna and Company ". The mills applied to the Textile Commissioner for permission to start a ginning factory. In anticipation of getting the requisite permission, the mills had advanced ₹ 1.54 lakhs to cotton growers for the supply of cotton to the mills. It had also constructed the ginning factory and purchased and installed the machinery at a cost of & .....

X X X X X X X

Full Text of the Document

X X X X X X X

tton in the ginning factory had to be insured against fire. As already stated, the advances made to cotton growers by the mills had been transferred to the account of Krishnaswami. The accounts also showed that Ramaswami Naidu has given a car to U. G. Krishnaswami at a cost of ₹ 22,300, but it was taken back by him subsequently for ₹ 10,000. The accounts said to have been maintained by Krishnaswami showed his liability to the mills at ₹ 95,796 as on March 31, 1952, and ₹ 1,07,083 as on March 31, 1953. This liability had been wiped off and a corresponding debit entry was raised in the name of one Kavetti Naidu, a cotton merchant. It was also found that the tax liability of U. G. Krishnaswami amounting to ₹ 97,176 was paid by Kadiri Mills Ltd. by adjustment in another account. U. G. Krishnaswami had obtained overdraft from the bank and Ramaswami stood as a surety for the same. It was also found that though Ramaswami Naidu had an eight annas share in the managing agency firm, he had full control of the managing agency firm as also the mills, he having purchased another six annas share owned by one G. Krishnan and others. U. G. Krishnaswami, though the pur .....

X X X X X X X

Full Text of the Document

X X X X X X X

o the cotton growers amounting to ₹ 1,54,000 had been transferred to Krishnaswami Naidu without any safeguards. (6) The drawings said to have been made by Krishnaswami from his business have not been properly explained and it has not been shown to have made any improvement in his wealth leading to the inference that the entire drawings in his name should have gone to Ramaswami Naidu. For the above reasons the Income-tax Officer treated the business said to have been run by Krishnaswami as belonging to Ramaswami and passed an order to that effect in Krishnaswami Naidu's assessment proceedings and appended the same to the assessment order of Ramaswami Naidu. Similarly, the business said to have been run by Krishnaswami Naidu came to be considered as that of Ramaswami Naidu for the assessment years 1953-54 and 1954-55 as well. There were appeals both by Krishnaswami Naidu as well as Ramaswami Naidu questioning the orders of the Income-tax Officer in relation to their assessments for the years 1952-53, 1953-54 and 1954-55. The Appellate Assistant Commissioner also found that Ramaswami Naidu was in full control of the managing agency firm of the mills and that he had discharge .....

X X X X X X X

Full Text of the Document

X X X X X X X

inclusion of the income from the business in question in the income of Ramaswami Naidu, and in consequence cancelled the protective assessments made against U. G. Krishnaswami Naidu. At the instance of Ramaswami Naidu the following question came to be referred to this court in T. C. No. 66 of 1965 : " Whether, on the facts and in the circumstances of the case, there was justification for treating the business alleged to have been carried on by U. G. Krishnaswami as belonging to the assessee in the assessment years 1952-53, 1953-54 and 1954-55 ? " and the following question was referred in T. C. No. 17 of 1965 at the instance of Krishnaswami Naidu : " Whether, on the facts and in the circumstances of the case, the cancellation of the assessment on U. G. Krishnaswami Naidu was justified in law ? " Mr. Swaminathan, learned counsel for the assessees, practically reiterates the same contentions as were raised before the Tribunal and contends that the finding that U. G. Krishnaswami Naidu is only a namelender and that in fact Ramaswami Naidu is the owner of the business in question cannot at all be sustained on the materials on record and that if at all the business .....

X X X X X X X

Full Text of the Document

X X X X X X X

these circumstances, we hold that the Tribunal is right in its conclusion that, on the facts and in the circumstances of the case, the business said to have been carried on by U. G. Krishnaswami did really belong to Ramaswami Naidu. Even apart from the question whether on the facts and in the circumstances there was justification for treating the business as that of RamaSwami Naidu, we are inclined to treat the question of benami urged before us as one of fact, and it is not possible for the assessee to canvass such a finding of fact arrived at by the Tribunal before this court. In Sree Meenakshi Mills Ltd. v. Commissioner of Income-tax [1957] 31 I.T.R. 28 ; [1956] S. C. R. 691 (S. C.)., their Lordships of the Supreme Court have expressed the view that findings on questions of pure fact arrived at by the Tribunal are not to be disturbed by the High Court on a reference unless it appears that there was no evidence before the Tribunal upon which they, as reasonable men, could come to the conclusion to which they have come, even though the High Court could, on the evidence, have come to a conclusion entirely different from that of the Tribunal, that such findings of fact can be revie .....

X X X X X X X

Full Text of the Document

X X X X X X X

ore, such a finding which is purely one of fact cannot be attacked in the reference under section 66 of the Income-tax Act. The learned counsel for the assessees, however, contends that though the question as to whether a particular transaction is benami or not may be a finding of fact, the Tribunal has erred in law in throwing the onus on Ramaswami Naidu to prove that the business was not his, and he takes support from the decision in Madura Knitting Company v. Commissioner of Income-tax [1956] 30 I.T.R. 764 (Mad.). In that case Rajagopalan and Rajagopala Ayyangar JJ. had expressed the view that whether the plea was one of benami or of sham, the burden was not on the assessee but on the department to prove that what was apparent was not real. We are of the view that the above decision may not be of any help to the assessees. In this case there is sufficient material on record to lead to the inference that it is only Ramaswami Naidu who carried on the business in question in the name of Krishnaswami Naidu and the Tribunal has not shifted the onus on the assessee requiring him to prove that he was not the owner of the business. The question of onus does not come into play at all in .....

X X X X X X X

Full Text of the Document

X X X X X X X

 

 

← Previous Next →

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Blog || Site Map - Recent || Site Map ||