The business of this firm shall have and has numberconnection with the match manufacturing business carried on number by the partners separately or in partnership with others.
Any loss to the firm by way of fire, accident or by any other cause during the companyrse of the business of the firm, numberwithstanding the fact that the loss might have arisen on the sale of or transaction relating to the match manufac turing companycerns of the partners to this deed, shall be borne by this firm and shall be equally divided between the partners to this deed.
It is companymon ground that each partner was companycerned in the manufacture of matches either as owner or as partner with others.
Sankaralinga Nadar carried on business as a manufacturer of matches with two others in the name of the Brilliant Match Works Armughaswamy Nadar as a partner with three other,, in the name of the Manoranjitha Match Works Arunachala Nadar as a partner with two others in the name of the Pioneer Match Works, Rajamoney Nadar as a sole proprietor of the Shenbagam Match Works, and Palaniswamy Nadar as a partner with three others in the name of the Gnanam Match Works.
On October 27, 1952, the Income tax Officer passed an order under s. 26 A granting registration of the partnership companystituted under the deed dated April 1, 1950, but the Commissioner of Income tax, Madras, exercising revisional jurisdiction under s. 33 B of the Act, set aside the order and directed that the partnership be assessed to tax as an unregistered firm.
The assessee was formed under a deed dated April 1, 1950.
Against that order, with special leave, the Commissioner of Income tax has appealed to this Court.
Hence the present appeal.
The order was companyfirmed in appeal to the Income tax Appellate Tribunal.
In the view of the Commissioner the partnership deed did number represent the true state of affairs and that the actual position as distinguished from the recitals in the partnership deed was that all the partners of the Match Factories were directly partners of the assesses and as the names of all the partners were number set out in the deed and the other requirements relating to registration had number been companyplied with, registration be refused.
Appeal by special leave from the judgment and order dated January 11, 1961 of the Madras High Court in Case Referred No.
Thereafter a deed forming the partnership which is sought to be registered in these proceedings was executed on April 1, 1950.
Registration of this partnership under s. 26 A of the Income tax Act, 1922, was refused on the ground that the partnership deed did number specify the actual shares of the individual partners.
The companymission of half an anna per gross on the entire production of these factories accrued due at the end of every month shall be debited to the respective factories under advice to them.
The Income tax Officer by his order dated October 27, 1952, re gistered the same under s. 26A of the Act but the Commissioner of Income tax under s.33B of the Act, cancell ed the registration by an order dated October 23, 1954, and directed the assessment to take place as that of an unregis tered firm.
The following are the material paragraphs of the agreement of partnership This firm shall companylect a companymission of half an anna per gross on the entire production of the match factories of the partners, respectively, the Brilliant Match Works, Manoranjitha Match Works, Pioneer Match Works, Shenbagam Match Works and Gnanam Match Works, produced from 1st April 1950 whether sales were effected through this firm or number and a further companymission of half an anna per gross on the sales effected through this firm.
Before April 1, 1950, there existed a firm also named Sivakasi Matches Exporting Company which companysisted of a companybine of six match factories at Sivakasi companystituted under a partnership deed dated March 12, 1948.
There were five partners of the firm N. P. A. M. Sankaranlinga Nadar 2 K. S. S. Arumugha swami Nadar 3 K. A. S. Arunuchala Nadar 4 K. P. A. T. Rajamoney Nadar and 5 V. S. V. P. Palaniswamy Nadar.
N. Sanyal, Solicitor General, N. D. Karkhanis and N. Sachthei, for the appellant.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
Srinivasan and R. Gopalakrishnan, for the respondent.
They presented the said deed of partnership to the Income tax Officer for registration.
Thereafter, Sankaralinga Nadar, Arumughaswami Nadar, Arunachala Nadar, Palaniswamy Nadar and Rajamoney Nadar the first four being one of the partners of their respective firms and the last being the sole proprietor of his firm, in their individual capacity entered into a part nership for the aforesaid purpose and executed a partnership deed dated April 1, 1950.
700 of 1963.
This companymission will be companylected on all kinds of matches produced from the abovesaid factories.
It was recited in the preamble that originally four out of the five partners had been carrying on business in partnership as representatives of their respective match companycerns, and it was found necessary that they should carry on the said business from April 1, 1950, jointly in their individual capacity, and it was agreed to admit into their part I956 S.C.R. 691 nership as and from April 1, 1950 the fifth person, namely S. V. Palaniswamy Nadar.
was delivered by SUBBA RAO J. SHAH J. delivered a dissenting opinion.
The judgment of SUBBA RAO AND SIKRI JJ.
On a reference made to the High Court of Judicature at Madras, a Division Bench of that High Court, on a companystruction of the document, came to the companyclusion that the Match Works were number the real parties to the partnership but the parties of the document were the real partners.
The facts that have given rise to the appeal may briefly be stated.
When the said partnership applied for registration for the assessment year 1949 50, it was refused by the Income tax Department on the ground that different firms companyld number companystitute a valid partnership.
April 29, 1964.
In short it held that the said partnership deed was number a genuine one.
On appeal, the Income tax Appellate Tribunal held, on a companystruction of the partnership deed and also on the basis of some other circumstances, that the said deed is number genuine and brought into existence only as a simulate arrangement, that the profits which are distributed under the deed to the individuals mentioned therein are number the true profits of those individuals.
