TaxTMI 
TaxTMI 
1989 (8) TMI 56
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....ed June 23, 1982, in I.T.A. No. 365 (Coch.) of, 1980. As directed by this court, the following question of law was referred to this court for our opinion: "Whether, on the facts and in the circumstances of the case, and also in view of the finding that 'the two firms comprised the same two partners and the nature of the business was similar', is the Tribunal right in interfering with the clubbing of incomes of the two firms and directing separate assessments?" The matter arises out of the income-tax assessment for the year 1976-77 for which the previous year ended on 31-12-1150 M.E. The assessee is a firm of two partners engaged in the business of manufacture, and sale of tiles. The partners of the firm are N. Sankaranarayana Iyer and N. ....
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....nistration. The accounting years of the two firms were different and the terms of dissolution contained in the partnership deed were also different. There were different bank accounts and the advancing of money by one firm to the other firm through personal accounts of the partners, the Tribunal held, would not amount to interlacing and interlocking as contemplated in the decision in Produce Exchange Corporation Ltd. v. CIT [1970] 77 ITR 739 (SC). The Tribunal went into the genesis of the two firms and the registration given by the Income-tax Department and came to the conclusion that there was no material to hold that the two firms in reality represented only one single concern whose income should be clubbed together for income-tax purpose....
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....r the Shanmugha Tile Works, in its present form, was constituted with Shri Sankaranarayana lyer and Venkiteswara lyer as partners on August 21, 1968, and they are carrying on business in the manufacture and sale of tiles, bricks, etc. Here also, after reconstitution, the profit and loss are to be shared equally. But the accounts had to be closed on March 31. The partnership Was one at will. The death of a partner shall not cause dissolution but the legal heirs of the deceased partner should continue the business with the remaining partner. This firm was also given registration under the Income-tax Act from the inception up to the assessment year 1975-76. The Tribunal found that the two firms were independently formed at different times. The....
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....ctors relating to the object and intendment of the partnerships and businesses, their nature, character and identity, coupled with the factum or otherwise of interlacing and interlocking of funds between the two firms. In that decision, it is held that though under the general law of partnership, there is no separate legal existence for a partnership firm apart from its partners, under the provisions of the Income-tax Act, a partnership firm has got a separate and distinct legal entity apart from its partners and therefore, a partnership firm is treated as a taxable unit. It has got a separate personality and existence of its own de hors the partners, and the partnership firm is entitled to be assessed as a separate entity. The Full Bench o....
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.... businesses carried on by them for the purpose of the Income-tax Act. There are special provisions in the Income-tax Act, 1961, regarding firms. Chapter XVI of the Act contains sections 182 and 183 relating to assessment of firms. Sections 184 to 186 relate to registration of firms and cancellation of registration. There are other special provisions relating to residence of firm (section 6(2)), amounts not deductible (section 40(b)), set off and, carry forward of losses of registered firms, unregistered firms etc., (sections 75 to 78) which would clearly show that a partnership is, treated by the Income-tax Act as a separate entity from its partners for the purpose of taxation. The question whether the same partners, when they enter into t....
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....du (G.) and Sons [1980] 121 ITR 97, which was approvingly referred to in the aforesaid decision of the Supreme Court. But counsel emphasised the fact that the decision of the Supreme Court in Kelukutty's case [1985] 155 ITR 158, as well as the Full Bench decision of this court in Ouseph and Sons case [1985] 154 ITR 598, required advertence to the fact of interlacing and interlocking as to whether the two partnerships should, in fact, be considered as carrying on one business and the income from one has to be clubbed with the income of the other. In Scales v. George Thompson and Co. Ltd. [1927] 13 TC 83, 89, dealing with a similar question, Rowlatt J. observed as follows "I think the real question is, was there any interconnection, any inte....