1986 (12) TMI 57

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..... Dinesh Kanoi was admitted to the benefits of the said partnership. On attaining majority by Shri Dinesh Kanoi, a new deed of partnership dated 1-10-1976 was executed and he also along with the other eight became partners of the said firm. Thereafter, another firm in the name of Hanumanbax Jwala Prasad was constituted by these very nine partners which was evidenced by a deed of partnership dated 2-3-1977. The partners in Kanoi Udyog and Hanumanbax Jwala Prasad were having same ratio of share in both the firms. Income of both the firms were clubbed together in the assessment year 1978-79 by the ITO since according to him, they formed only one taxable unit. The said order of the ITO was upheld up to the stage of the Tribunal vide order of the .....

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..... ed to the instant year. Facts pertaining to the instant year, the learned counsel for the assessee argued, need fresh scrutiny. It is urged by him that in the assessee-firm there are only four partners whereas in Hanumanbax Jwala Prasad there are nine partners. Barring the four common partners the other five partners in Hanumanbax Jwala Prasad do not have any interest in the assessee-firm and, therefore, both the firms cannot be taken as single unit for the purpose of income-tax. Further, according to him, there is no interlacing and interlocking of funds between the firms. Hanumanbax Jwala Prasad was when constituted in the year 1977 it was financed by the assessee-firm but the learned counsel argued during the course of three years Hanuma .....

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..... and as such, personality of both the firms is common. But where the two firms are indeed constituted by different persons, though some of them may be common, there cannot be identity in the two firms. They cannot be taken as single person within the meaning of section 2(31) of the Act, and their income cannot be taxed as income of single unit. In the instant case there is no allegation of any of the partners of the two firms being benamidar of the other. Moreover, there is no material to show that there was interlacing and interlocking of funds between the two firms though there was cash dealing between the two. It is, therefore, held that the income of Hanumanbax Jwala Prasad cannot be clubbed in the instant assessment year with that of t .....

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