TMI Blog1936 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... to two other godowns also belonging to the Madras Port Trust. Until 1933-34 the family represented by M. K. Naicker Sons which was an undivided family of the firm constituting of M. Raju Naicker and R. Govidarajulu Naicker was separately assessed. The managing member of the former firm had for many years been supplying labour to the Madras Port Trust under similar contracts. When the before mentioned contracts were about to expire, the Port Trust contrary to their previous practice decided to call for tenders for the supply of labour for a period of five years from September, 1933, the previous practice having been to grant contracts without calling for tenders. M. K. Naicker Sons and the other partnership decided to tender jointly for this contract in pursuance of an informal agreement entered into between them on July 3, 1933, in which it was agreed that if the tender should be accepted by the Port Trust, 60 per cent. of the profits and loss would be allotted to M. K. Naicker Sons, 25 per cent. to Raju Naicker and 25 per cent. to Govindarajulu Naicker and that on acceptance of the tender a detailed partnership agreement would be executed and registered. These persons succe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke a return of its income for he tax year 1934-35. The firm filed a return declaring a loss amounting to ₹ 6,475-13-7. Since the assessee firms contract with the Port Trust commenced only in September 1933 they required September to August to be treated as that previous year for the purposes of the assessment. This claim was allowed but the Income Tax Officer held that for the year 1934-35, M. K. Naicker Co., was liable to be assessed on the profits of M. K. Naicker Sons and the partnership of Raju Naicker and Govindarajulu Naicker for the period January 1933 to August 31, 1933 and he determined the profits of this period to be ₹ 23,064. The facts have been found by the Income Tax Commissioner as follows : (a) The individual partners were separately carrying on the business of supplying labour to the Madras Port Trust until August 31, 1933 : (b) When the Port Trust invited tenders for the supply of labour from September 1, 1933, the partners of the firm tendered jointly and secured the contract : (c) From September 1, 1933 the partners continued to carry on the same business (supply of labour to the Port Trust) jointly in accordance with the agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person carrying it on must be different. For the Commissioner of Income Tax, Bell v. National Provincial Bank at England Ltd. [5 T.C. 1] was relied upon. The question there was whether the respondent Bank which acquired by purchase the business of the Country of Stafford Bank succeeded to the business of the latter Bank within the meaning of Rule 4 of the 1st and 2nd Cases of Schedule D, Section 100, of the Income Tax Act of 1842 the material part of which is similar to the sub-section in question here. On page 10 the Master of the Rolls says : It seems to me that the words of Rule 4 are plain, and that if the National Provincial Bank had not existed, but some new company had been formed to take over for he first time the business of the Staffor Bank, here would have been a case directly falling in terms within the words of the 4th Rule : If any person shall have succeeded to any trade, manufacture, adventure or concern. In the case I put of a new company formed for the first time and acquiring the Stafford Bank, that would clearly be a case of a person succeeding to a concern. What deference does it make that that person who succeeds to the concern should himse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... businesses. Unlike the case of the Stafford Bank, that was nothing which either of these partnerships could sell to any one for example, in August 1933, or to take an earlier date, July, when these two entitles informally agreed to make a joint tender for the contract in question. They had no contract lasting beyond August 31, 1933 to sell, even supposing the Madras Port Trust would permit them to decided on so. It is conceded also that M. K. Naicker Co., did not take over any of the assets or liabilities of the business carried on by M. K. Naicker Sons and Raju Naicker and Govindarajulu Naicker, whereas, in Bell v. National Provincial Bank of England the latter took over the Stafford Banks existing business and its clients and also its premises. The Income Tax Officers main reason for the assessment is that these persons had for several years possessed the monopoly of supplying labour to the Port Trust and finding that their monopoly was about to come to an end owing to the adoption by the Port Trust of the policy of inviting tenders and in order to secure continuity for their business they entered into a partnership and put in their tender for the contract and us they were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. The application was refused on the ground that the individual shares of the partners were not specified in the instrument of partnership. The instrument of partnership as has already been sated treats the partnership of M. K. Naicker Sons which was made up of for partners as one of the three partners in the firm of M. K. Naicker Co., and to this partnership a 7 annas share in the rupee in the profits an losses is given. The contention of Income Tax authorities is that as M. K. Naicker Sons consists of four partners, the shares of each of them should have been set out in the partnership deed (Ex. C). The shares of the partners in M. K. Naicker Sons were each Re. 0-1-9 totalling 7 annas and as that partnership had previously been registered, a reference to the instrument relating to it, a copy of which was filed with the Income Tax authorities, would show this. Not only would the Income Tax authorities be aware of the shares of the partners - and it is conceded that they did know - but the application for registration itself set out the individual shares of the partners of M. K. Naicker Sons. Notwithstanding this knowledge, the Income Tax Officer -and his action has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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