TaxTMI 
TaxTMI 
TaxTMI 
1962 (5) TMI 45
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....6 2. Satya Prasad 0-6-6 3. Manohar Lai 0-3-0 For the assessment year 1955-56 the assessee applied for registration under section 26A and relied on an instrument of partnership dated June 21, 1953. On a consideration of the terms of that document the Income-tax Officer took the view that the status of Manohar Lal was not that of a partner but merely that of an employee and as such the partnership constituted under the instrument was not a genuine partnership. Accordingly, he refused registration to the firm. An appeal to the Appellate Assistant Commissioner against the order refusing registration failed, but on further appeal the Income-tax Appellate Tribunal took the view that the restrictions and limitations imposed by the instrument on Manohar Lal were within the purview of the provisions of the Indian Partnership Act and held that the firm was genuine and entitled to registration. Thereafter, the Commissioner of Income-tax made an application under section 66(1) for a statement of the case to this court and the Tribunal has accordingly stated a case. For the succeeding assessment year 1956-57, the Income-tax Officer again refused registration on the same ground on which re....
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....d at the settlement of accounts. His share in profits and losses is to be 0-3-0 in the rupee as a working partner for his consolation and so that he should work honestly and carry out the directions of the first two partners. The first feature relied on by Sri Gopal Behari in support of his argument that there was no valid partnership between the three persons was that all the three persons did not jointly own the property and the assets of the partnership. Indeed Manohar Lal was specifically forbidden from investing anything in the partnership and was to remain only a working partner. It is not possible to assent to this argument. There may be a partnership where the property and the assets of the partnership may not be the subject of joint ownership between all the partners but may belong only to some or one of them. In Halsbury's Laws of England, third edition, volume 28, page 487, paragraph 933, it is laid down as follows: "...Persons may be partners either generally or in some particular business or isolated transaction, although all or part of the property used for the purpose of such business transaction may not be the subject of joint ownership, but may belong t....
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....only points to the right of the first two partners to inspect and examine the accounts at any time. It does not exclude the inspection and examination of accounts by Manohar Lal. The utmost that can be said is that accounts may have to be recorded according to the directions of the first two partners and Manohar Lal may not be entitled to override that direction. This, however, does not mean that Manohar Lal would have no access to the account books. If there was anything in the agreement excluding Manohar Lal altogether from inspection or examination of the accounts or anything disentitling him to the taking of accounts the position might have been different but that is clearly not so. It was then emphasised that Manohar Lal was entitled to draw only up to ₹ 100 per month for his expenses subject to adjustment at the settlement of accounts. There does not appear to be anything in this condition also destructive of the relationship of partners. It has been noticed that only the first two partners were to invest all the money needed for the business of the partnership. Their shares in the partnership were also more than double the share of Manohar Lal. It is natural, therefor....
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....who along with the father were alleged to form the partnership, did not have a specific share and their share was to depend upon the will of the father alone. In those circumstances, clearly, there could be no partner-ship between the father and the sons. The other case was a decision of the Supreme Court in M.P. Davis v. Commissioner of Agricultural Income-tax [1959] 35 ITR 803 (SC). In this case the partnership was between two brothers. Prior to the partnership the relation between the two brothers was that of a master and a servant. One of the brothers who alone was entitled to invest capital to the total exclusion of the other brother and who alone was entitled to get back the assets on dissolution was not bound to do any work at all. The other brother was entitled to a remuneration only if there were profits but to no remuneration at all if there was a loss. The mode of sharing of profits was complicated and this made it impossible for the sharing of the losses in the same manner. Having regard to these facts and to the conduct of the parties the Supreme Court held that the relationship between the parties was not of partners but that the partnership was merely a cloak for di....
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....B and C for the amalgamated working of the Burma rice business of all the three companies under the management of A, whereby the entire business of the three companies was to be taken over and conducted by A in its absolute discretion. At the end of each accounting year the profit and loss of the combination at each place of business, namely, Rangoon, Bassein, Akyab and Moulmein, was to be shared in certain proportions, the shares of A and C being joint and the share of B, a separate share. A restriction was imposed on A, B and C against hiring out their properties, without the consent of A. Certain specific rights were conferred on B none of which obtained so far as C was concerned: the right, for example, to information regarding the progress of business, the right to have accounts made up in Burma and audited there and the right to inspection of accounts and to receive a copy thereof; the right of the company's engineers to check whether its property was in efficient working order; the right to utilisation of finance provided by them. On these facts the Supreme Court held that the relationship between A, B and C was that of partners and the fact that no special rights were p....