Separate tax identity of partnership firms depends on facts, not merely common partners and identical shares.

For income-tax purposes, a partnership firm is treated as a separate assessable unit distinct from its partners, and the statutory scheme contemplates assessment of firms and partners separately. Common partners and identical profit shares do not, by themselves, make two firms one taxable entity as a matter of law. Whether one or two firms exist depends on the facts, including the nature and working of the businesses, rather than on an abstract rule of partnership law. Accordingly, common ownership structure alone does not justify collective assessment of the firms' income.

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Issues: Whether two partnership firms having common partners and identical shares are, as a matter of law, one firm for income-tax purposes; and if not, whether their income is to be assessed collectively.

Analysis: The Act treats a firm as an assessable unit distinct from its partners. The charging provision expressly contemplates assessment of both firms and partners, while the scheme of assessment recognises firms as separate taxable entities. The authorities considered showed that the proposition that common partners must necessarily constitute only one firm was too broad. The better view was that the existence of one or two firms depends on the facts of the case, including the nature and working of the businesses, and not on an abstract rule of partnership law. Common partners and identical shares do not, by themselves, compel collective assessment.

Conclusion: The question was answered in the negative. Two firms with common partners and identical shares are not, as a matter of law, one firm for income-tax purposes, and the income of such firms is not to be assessed collectively merely on that basis.

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