TaxTMI 
TaxTMI 
1996 (3) TMI 9
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....il and Flour Mills can be treated as two separate firms and distinct assessable entities ?" The Full Bench overruled an earlier decision of the same court in Addl. CIT v. M. Venkata Narasimha Rao and Co. [1976] 104 ITR 28. The Full Bench enunciated as many as ten principles as flowing from the several decisions considered by them. The ten principles stated are as under : "(1) The concept of partnership law is that a firm is not an entity or a person in law but only a compendious mode of designating persons who have agreed to carry on business in partnership. (2) A firm as such is not entitled to enter into partnership with another firm or individual as the definition of 'person' in section 3(42) of the General Clauses Act, 1897, cannot b....
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....racter and identity, coupled with the factum or otherwise of interlacing and interlocking of funds between the two firms. (9) The very question as to whether there was really one partnership or two different assessable entities being two separate distinct partnerships unconnected with each other, has to be determined by the income-tax authorities for the purpose of computing the assessment under the Income-tax Act but not under the general law governed by the provisions of the Partnership Act. (10) The finding of the Tribunal about the object and intendment of the partnerships and the businesses and the factum or otherwise of the interlacing and interlocking of the funds between the two partnerships is a question of fact and such finding ....
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.... registration under the Income-tax Act granted by the Income-tax Officer to Sri Lakshmi oil and Flour Mills was not cancelled and the same was allowed to continue as a registered firm. The two firms had been constituted under two separate deeds of partnership. There was no interlacing or intermixing between the two firms. The Tribunal found that there was no justification for including the profit of Rs. 5,500 belonging to Sri Lakshmi oil and Flour Mills in the income of the assessee-firm and consequently deleted the same. Applying the aforesaid principles to the facts and circumstances found by the Tribunal, we must hold that the two firms in the instant case are not, in reality, one firm but two different legal entities for the purpose of....
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....the same persons and carrying on different businesses, the assessing authority must test the claim in the light of the partnership law. It is only after that question has been first determined, namely, whether in law there is only one partnership firm or two partnership firms, that the next question arises : whether the turnover is assessable in the hands of the partnership firm as a taxable entity separate and distinct from the partners ? There is first a decision under the law of partnership ; therefore, the second question arises, the question as to assessment under the tax law. It is clear, therefore, that reference must be made first to the partnership law. The Indian Partnership Act, 1932, has, by section 4, defined a 'partnership' a....
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.... a firm is a corporate entity or enjoys a juristic personality in that sense. The firm name is only a collective name for the individual partners. But each partnership is a distinct relationship. The partners may be different and yet the nature of the business may be the same, the businesses may be different and yet the partners may be the same. An agreement between the partners to carry on a business and share its profits may be followed by a separate agreement between the same partners to carry on another business and share the profits therein. The intention may be to constitute two separate partnerships and, therefore, two distinct firms. Or to extend merely a partnership originally constituted to carry on one business, to the carrying o....
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....olding that there were no two separate firms in law and the business of both GM and GFC have to be taken as belonging to the same four partners constituting a single firm ?" The assessment years concerned herein are 1965-66 to 1969-70. The question, in short, was whether the two firms---Greenline Motors and Greenline Finance Corporation---were two distinct firms, to be assessed separately as such or could they be considered as constituting one and a single firm and assessed as such. The Tribunal followed the decision of the Andhra Pradesh High Court in Addl. CIT v. M. Venkata Narasimha Rao and Co. [1976] 104 ITR 28, and upheld the Revenue's contention. When the matter came to the High Court, on reference, the High Court noticed that the de....