By a deed of partnership dated June 14, 1952 the firm was re companystituted and three other persons were admitted as partners therein.
For companyvenience we would call the firm companystituted on June 14, 1952 as the Ferozepore firm and the one companystituted on December 5, 1952 as the Rupar firm.
The partnership deed of December 5 1952 specified the names of 14 persons including Gosain Chander Bhan as partners but did number specify the names of all the partners of Gosain Chander Bhan Co. of Ferozepore.
The funds invested by Gosain Chander Bhan in the Rupar firm came out of the funds belonging to the Ferozepore firm.
It appears that Gosain Chander Bhan had taken the capital from the Ferozepore firm, and the amount was shown as an item in his accounts with the Ferozepore firm.
It seems that other partners of the assessee firm made similar statements on February 27, 1954.
In appeal his order was, however, reversed by the Appellate Assistant Commissioner by his order dated August 12, 1954.
The Income tax Officer also found that the funds invested in the Rupar firm in the name of Gosain Chander Bhan were also provided by the Ferozepore firm.
Harbhajan Lal in his statement dated January 30, 1954 and the other partners in their statements dated February 27, 1954 admitted that Gosain Chander Bhan had entered into the partnership number in his individual capacity but on behalf of the Ferozepore firm.
On these findings, the Income tax Officer rejected the application Under s. 26 A. On appeal, the Appellate Assistant Commissioner set aside these findings, and held that Gosain Chander Bhan was the partner of the assessee firm in his individual capacity and number as representative of and on behalf of all the partners of the Ferozepore firm.
On further appeal, the Income tax Appellate Tribunal, Delhi Branch, upheld these findings of the Appellate Assistant Commissioner, and held that those findings were supported by the decisions in Commissioner of Income tax v. Messrs. Agardih Colliery 1 and Commissioner of Income tax v. Laxmi Trading Company 2 .
Harbhajan Lal and other partners of Rupar firm admitted that Gosain Chander Bhan was number a partner in the Rupar Firm in his individual capacity but had joined it on behalf of the Ferozepore firm.
Appeal by special leave from the judgment and order dated the January 24, 1961 of the Punjab High Court in Income tax Case No.
By his order dated February 27, 1954, the Income tax Officer rejected the application under s. 26 A. He held that 1 the deed dated December 5, 1952 did number specify the date of the companystitution of the assessee firm 2 some of the parties to deed having numberexperience in the business of the firm were number really partners therein, and the number of partners in the firm had been artificially increased with a view to reduce the taxable liability 3 the firm was number genuine, as it had numberbanking account, did number possess the income tax clearance certificate, did number numberify its companystitution to the P.W.D., and payments were received from the P.W.D. in the name of Harbhajan Lal.
Other partners are partners in their individual capacity.
The Commissioner of Income tax number appeals to this Court by special leave.
He further came to the companyclusion that as in reality all the partners of the Ferozepore firm and number Gosain Chander Bhan alone, were also partners along with 13 other persons in the Rupar firm, the total number of partners exceeded 20.
The capital of the assessee firm was supplied by Gosain Chander Bhan.
The Commissioner of Income tax, Punjab then applied to the Appellate Tribunal under s. 66 1 of the Indian Income tax Act A.I.R. 1955 Patna 225.
In doing so the Tribunal based itself on the decisions in The Commissioner of Income tax v. Agardih Colliery Company 1 and Commissioner of Income tax v. Laxmi Trading Co. 2 The Commissioner of Income tax then applied to the Tribunal under s. 66 1 to refer to the High Court four questions of law.
Niren De, Additional Solicitor General, Gopal Singh and R. N. Sachthey, for the appellant.
The Commissioner thereupon preferred a petition before the High Court under s. 66 2 for A.I.R. 1955 Patna 225.
The companyrect ness of the decision of the Appellate Assistant Commissioner on these points is numberlonger challenged.
The business carried on by the Ruper firm is similar to that carried on by the Ferozepore firm.
By its order dated January 24, 1961, the High Court dismissed the application, and held that the questions of law were well settled.
On April 21, 1953 an application was presented by the part ners of the Rupar firm, accompanied by the deed of partnership dated December 5, 1952 before the Income tax Officer, Ambala for registration of the firm under s. 26 A of the Act for the assessment year 1953 54.
One of the terms of the partnership was that if any work was carried on by any one of the partners individually or in partnership with others, the profits and losses arising out of that work would be divided amongst all the partners in proportion of their shares in the firm.
The largest share in the reconstituted partnership was that of Gosain Chander Bhan.
One Gosain Chander Bhan was a partner of both the assessee firm and the Ferozepore firm.
set aside all these findings of the Income tax Officer.
The relevant facts are these On December.
The appeal preferred therefrom by the Income tax Officer before the Income tax Appellate Tribunal Delhi Branch was dismissed by it by its order dated September 5, 1955.
2 and 4, and submitted that the following two questions of law arose for decision a is there any material on the record to support the finding that Gosain Chander Bhan was the real partner of the assessee firm and is number a partner in a representative capacity representing all the partners of Gosain Chander Bhan and Company of Ferozepore, and b whether the present is a case of sub partnership to which the two cases referred to in the order by the Tribunal apply ?
was delivered by Bachawat J. Mudholkar J, delivered a dissenting Opinion.
CIVIL APPELLATE JURISDICTION Civil Appeal No.
On September 18, 1956, the Commissioner of Income tax applied to the Punjab High Court under s. 66 2 of the Indian Income tax Act for an order directing the Tribunal to refer the aforesaid questions to the High Court, At the hearing of the application before the High Court, Counsel for the Commissioner of Income tax gave up questions Nos.
In companyrse of proceedings arising out of the application for registration of the assessee firm under s. 26 A, Harbhajan Lal, one of its partners, stated on January 30, 1954 I Harbhajan Lal son of Shri Ram Chand of Rupar solemnly declare that firm M s. Chander Bhan Harbhajan Lal companysisted of 14 partners as mentioned in the return and deed of partnership.
He, therefore, dismissed the application by his order dated February 27, 1954.
mentioned at this stage that there was another firm of the name of Chander Bhan Co., of Ferozepore hereinafter referred to as the Ferozepore firm , companysisting of 8 partners and companystituted under a deed dated June 14, 1952, which provided inter alia If any one of the executants enters into business individually or along with another person all the partners of the firm shall be entitled to the profit and liable for the loss, accruing from that business according to the shares hereinbefore mentioned.
16 of 1956.
It may be.
The Income tax Officer examined the partners companystituting the firm and recorded their statements in order to ascertain the true position with regard to the companystitution of the firm.
Bachawat, J. This appeal by special leave is from an order of the Punjab High Court rejecting an application by the Commissioner of Income tax Punjab under S. 66 2 of the Indian Income tax Act, 1922.
In the original firm there were only 5 partners including Gosain Chander Bhan while in the reconstituted firm there were 8 partners including Gosain Chander Bhan.
The dead of partnership sets out the names object of the firm was to carry on business similar to that carried on by Gosain Chander Bhan Co. It may be mentioned that in this firm also Gosain Chander Bhan was the major shareholder.
On appeal, the Appellate Assistant Commissioner, Ambala Branch,.
On December 5, 1952 a partnership firm bearing the name of Messrs. Chander Bhan Harbhajan lal was formed at Rupar.
The Judgment of Sarkar and Bachawat JJ.
605 of 1963.
The Income tax Officer so held that thought the deed dated December 5, 1952 stated that Gosain Chander Bhan was the partner having 6/16th share, in reality the Ferozepore firm was the partner of the assessee firm having 6/16th share therein and companysequently, the assessee firm was illegally companystituted, because 1 the Ferozepore firm companyld number legally be a partner in the assessee firm 2 the total number of partners of the assessee firm was 21 and 3 moreover, the individual shares of the eight partners of the Ferozepore firm were number specified in the deed dated December 5, 1952.
requiring the Tribunal to refer the following questions to the Punjab High Court Whether the Income tax Appellate Tribunal was right in applying the decision of the Patna High Court in the case of Commissioner of Income tax versus M s. Agardih Colliery Company and of the Punjab High Court in the case of Commissioner of Income tax versus Lakshmi Trading Company to the facts of this case.
Bishan Narain, O.C. Mathur and J. B. Dadachanji, for the respondent.
On April 21, 1953, 14 partners of the firm of Messrs. Chander Bhan Harbhajan Lal of Rupar hereinafter referred to as the assessee firm companystituted under the instrument of partnership dated December 5, 1952, applied to the Income tax Officer, Project Circle, Ambala for registration of the firm under s. 26 A of the Indian Income tax Act.
None of these findings on questions of fact has, been negatived or upset by the Appellate Assistant Commissioner or by the Tribunal.
Such a partnership being invalid in law the firm companyld number be registered under s. 26A of the Act.
If the answer to question No.
Gosain Chander Bhan was partner number in his individual capacity but on behalf of the firm M s. Gosain Chander Bhan and Company Ferozepur having about six partners.
Upon these and some other facts he came to the companyclusion that the deed of partnership dated December 5, 1952 did number specify the real partners of the firm and, therefore, the firm cannot be registered.
old name, however, was companytinued.
