The profit or loss of the business of the Combination carried on at the under mentioned places was to be shared by and divided between Steels and Ellermans in the following ratios Rangoon Bassein Akyab Moulmein Steels Burma 68 68 68 72 Ellermans 32 32 32 28 The rice mills belonging to Burma, viz.,
The facts leading up to this appeal may be shortly stated as under Prior to November 29, 1928, Steel Bros. Co. Ltd. hereinafter referred to as Steels and Ellermans Arracan Rice and Trading Co. Ltd. hereinafter referred to as Ellermans carried on trade in Burma rice and or its by products in Burma in London and elsewhere inter alia through Burma and London Bullenger Rice Pool and the New General Rice Co. Ltd. Apart from the selling of rice, both these companypanies had rice milling machines and produced rice from paddy.
The companybined business of Steels, Burma and Ellermans was referred to therein as the Combination.
There was another companypany known as the Burma Co. Ltd. hereinafter referred to as Burma .
The assessee preferred an appeal to the Income tax Appellate Tribunal Calcutta Bench and by its order dated the 20th February, 1951, the Tribunal held that although the agreement entered number into on November 29, 1928, showed that the three companypanies would carry on the whole of their Burma rice business on amalgamation, on an examination of the agreement it would appear that the companypanies which formed the partnership were really Steels and Ellermans and Burma which was a hundred per cent.
Burma Upper Kanungtoe Mill in Rangoon, Burma Mill in Bassein and Burmas Martaban Mill in Moulmein, were to be worked by the Steels for the purpose of the Combination clause 4a .
In companynection with the assessments for the assessment years 1943 44 and 1944 45 the Combination which is hereinafter referred to as the assessee made applications to the Income tax Officer under section 26A of the Act for registration of their partnership said to be companystituted of Steels and Ellermans.
By two separate orders dated March 19, 1948, and March 31, 1949, the Income tax Officer, District V, Calcutta, refused registration of the partnership on the ground i that the partnership was number companystituted of Steels and Ellermans only but was companystituted of those two parties and a third party, viz, Burma, and that the partnership deed did number specify the shares of the said three partners and ii that the loss arising during the previous year had number been properly allocated proportionately to the said three partners the whole of the loss falling to the shares of Steels and Burma having been borne by Steels only.
subsidiary of Steels had hardly anything to do with the Combination.
The assessee carried an appeal before the Second Additional Appellate Assistant Commissioner of Income tax, A Range, Calcutta, who upheld the orders of the Income tax Officer on the grounds that the application for registration was signed by two partners, Steels and Ellermans, whereas the partnership deed showed that it was a partnership of three partners and that the individual shares of Steels and Burma were number shown separately.
All the shares of this companypany were held by Steels, who were also its managing agents.
The agreement was signed and the companymon seals of Steels and Ellermans were affixed thereto and it was also signed by one James Kilgour Michie for and on behalf of Burma.
This companypany also had a few rice mills.
It never purchased paddy or sold rice.
The agreement was to take effect as from 1st December, 1928, and companyld be terminated on 30th November, 1930, or on any subsequent 30th November, by and party giving numberice to that effect to others number later than the preceding 1st August clause 12 .
On or about November 29, 1928, an agreement was entered into between the Steels, Burma and Ellermans to provide for the amalgamated working of the Burma rice business in Burma and London of all the three companypanies under the management of Steels.
All stocks of Burma rice and by products in hand at 30th November, 1928, were excluded from this agreement and remained the property of the individual owners to be disposed of by them as they thought fit and the entire business in Burma hitherto carried on by Ellermans was to be taken over and managed by Steels as from 1st December, 1928, and companyducted from Steelsoffices in London, Rangoon and other Burma branches in Steels name solely and in companyjunction with the whole of the rice business of all descriptions of Steels and Burma and Steels were to companyduct the said business in such manner as they in their absolute discretion should think fit.
Bhagwati, J. This appeal with special leave is directed against a judgment and order of the High Court of Judicature at Calcutta delivered on a reference by the Income tax Appellate Tribunal Calcutta Bench under section 66 1 of the Indian Income tax Act XI of 1922 hereinafter referred to as the Act whereby the High Court answered the referred question in the negative.
