TaxTMI 
TaxTMI 
TaxTMI 
1964 (2) TMI 86
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....na Paul and Amar Krishna Poddar by a deed of assignment dated 10th December, 1951, executed by Anil Krishna Paul and the legal heirs of Jogendralal Nandy. By an instrument dated 9th August, 1954, the said Sunil Krishna Paul and Amar Krishna Poddar entered into a partnership to share the commission receipts. They also employed staff in order to verify the correctness of the sales of the company, from which they derived commission and expenses incurred by them for verifying the sales of the company, have also been allowed by the department. A true copy of the deed dated 9th August, 1954, is annexure "A" hereto forming part of the case. 4. For the assessment year 1956-57 an application was made on behalf of the said partnership to the Income-tax Officer for registration of the firm under section 26A of the Income-tax Act. The Income-tax Officer found that no business whatever was carried on by the applicant and, therefore, it did not constitute a partnership which could be registered under section 26A. The Income-tax Officer, therefore, treated the applicant as an "association of persons" and made the assessment in that status. No other defect was mentioned by the....
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....acquired a right of receiving commission of 1% on sales from Messrs. Annapurna Cotton Mills. The said Jogendra Nath Nandi died on the 7th June, 1950. Along with Anil Krishna Paul, he entered into an agreement dated 26th January, 1950. The benefits of the agreement were transferred in favour of the applicants, Sunil Krishna Paul and Amar Krishna Poddar, by a deed of assignment dated 10th December, 1951, executed by Anil Krishna Paul and the legal heirs of Jogendra Nath Nandi. On the 9th of August, 1954, the assignees, Sunil Krishna Paul and Amar Krishna Poddar, entered into a partnership to share the commission receipts and the instrument of partnership was executed on the said date. It was alleged by the applicants that they carried on the business of partnership by employing staff in order to verify the correctness of the sales of the company. Such expenses at the time of assessment were allowed as deductions by the department. The relevant year of assessment is 1956-57. For this assessment year an application was made on behalf of the said partnership to the Income- tax Officer for registration of the firm under section 26A of the Act. The Income-tax Officer found that no busine....
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....wing clauses are relevant for the purpose of considering whether a partnership business was actually entered upon: (5) Proper records and accounts of this partnership shall be kept at the principal place of business and shall be open to inspection by both the partners at any time during the working hours. (6) Accounts of this partnership shall be closed and adjusted at the end of every Bengali year. (7) Profits and/or losses of this partnership shall be borne by the said two partners in two equal shares. It has already been said that the aforesaid applicants employed staff in order to verify the correctness of the sales of the company. Further, it appears from the aforesaid clauses that provision for maintenance of record and the closing of yearly accounts at the end of each Bengali year was made and the principal place of business was also specified. On the basis of the above intrinsic evidence in the instrument, it has been mainly argued by Mr. Subimal Roy that a business in the true sense of the term was being carried on by the applicants, and, therefore, an actual partnership business was created in order that it may come within the ambit of section 4 of the Indian Partnershi....
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....essarily mean that income and profit should invariably be derived therefrom and this does not involve any undertaking of an industrial or commercial nature. Mr. Roy has referred us to the observations of this court in the case of Rogers Pyatt Shellac & Co. v. Secretary of State for India*. At page 1088 their Lordships observed that the word "business" is one of large and indefinite import and connotes something which occupies attention and labour of a person for the purpose of profit. The word means almost anything which is an occupation or a duty requiring attention as distinguished from sport or pleasure and is used in the sense of an occupation continuously carried on for the purpose of profits. A concern by reason of which one can be said to have connection with such an occupation is business connection. In making this observation their Lordships of this court referred to the decision of Smith v. Anderson*, Rolls v. Miller** and Commissioners of Inland Revenue v. Marine Steam Turbine Co. Ltd.*** These cases were also referred to us by Mr. Subimal Roy. In the case of Rolls v. Miller**, it appears that the lease of a house contained a covenant that the lessee should not....
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....s the amount payable to them was fixed in terms of an agreement with the Annapurna Cotton Mills Ltd. and that the employment was made only for the purpose of keeping a watch as to whether the earned income was properly coming into their coffers. Accordingly, it cannot be said that the applicants were carrying on a business within the meaning of section 4 of the Indian Partnership Act. The expression "to share the profits of a business carried on" in section 4 really means that there must be some contribution by the partners to the growth or enlargement of business and with this end in view the partners must be pursuing the business in such a manner that it can apparently be seen that they were prosecuting or promoting the business. Such elements are absolutely absent in the instrument of partnership in so far as earning the profits from the Annapurna Cotton Mills Ltd. is concerned and, as such, if we construe the true import of the words used in section 4 of the Indian Partnership Act, it cannot be said that any business was being carried on by the applicants. This being the position, it may very well be said that there is no partnership, as there is absence of combinatio....
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....e out and accordingly the finding of the Tribunal in this regard appears to be correct. The next point for consideration is whether the income-tax authorities were justified in disallowing the application of the applicants under section 26A of the Act. Section 23(5)(a) of the Act provides that in the case of a registered firm the income-tax payable by the firm itself shall be determined. In order to invoke this provision a firm need be registered under section 26A of the Act. This section contemplates that certain conditions are essential to the registration of a firm. It is necessary that on behalf of the firm an application should be made to the Income-tax Officer by such persons and at such times and containing such particulars and being in such form and verified in such manner as are prescribed by rules 2 to 6B framed under the Act. Another condition, inter alia, is that the partnership must be valid and genuine and must actually exist in the terms specified in the instrument. When an instrument is presented for registration under section 26A, the Income-tax Officer is entitled to enquire whether the instrument is intended by the parties to have real effect as governing their ....