Partnership deeds and business interconnection determine whether multiple ventures form one assessable firm or separate firms

Where the same partners execute more than one partnership deed, the decisive question is whether the deeds and surrounding circumstances show an intention to create separate firms or only one firm carrying on multiple businesses. Interlacing of funds, common management, and other connected business incidents may indicate a single assessable unit. On the facts noted, cloth business funds were used to construct the theatre, the accounts showed interconnection, and the theatre building was reflected in the firm's books and balance-sheet as an asset. The existence of two distinct and independent partnerships was not established, and the income from both businesses was assessable in the assessee's hands.

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Issues: Whether two partnership deeds executed by the same partners created two independent firms, and whether the theatre business was liable to be assessed separately from the cloth business.

Analysis: The decisive test was the intention of the partners, to be gathered from the partnership deeds and surrounding circumstances, including the interlacing or interlocking of management, finance and other business incidents. The finding recorded was that the funds of the cloth business were utilised for construction of the theatre, the accounts reflected such interconnection, and the theatre building was shown in the firm's books and balance-sheet as an asset of the assessee. On these facts, the existence of two distinct and independent partnerships was not established.

Conclusion: The question was answered against the assessee. The theatre business was held not to belong to a separate independent firm, and the income from both businesses was assessable in the hands of the assessee.

Ratio Decidendi: Where the same partners execute more than one partnership deed, the decisive question is whether the surrounding circumstances show an intention to constitute separate firms or only one firm carrying on multiple businesses; interlacing of funds and common business incidents may justify treating them as one assessable unit.

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