TaxTMI 
TaxTMI 
1995 (5) TMI 47
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....s a registered firm. The names of the parners and their share ratios in the said firm during the previous year ended 31-12-1986 relevant to the assessment year 1987-88 are as under :--- (1) Shri D.B. Dhru 37% (2) Shri KM. Parekh 37% (3) Shri K.J. Shah 26% 3. One Mr. P.G. Pathare was practising separately as a Solicitor as an individual under the name and style " M/s. Pathare and Company " for the last 40 years. Due to old age, he could not cope up with the professional work. Therefore, he admitted the aforesaid partners of M/s. Dhru & Co. to join his concern and a new partnership firm by the name and style " M/s. Pathare Dhru and Company " was formed by the deed dated 8th day of March, 1984. The results of the aforesaid partnership activity were to be divided among the partners in the following manner :--- (a) Shri P.G. Pathare --- Fixed amount calculated @ Rs. 1,000 per month (b) The balance of the profit will have to be divided in the following manner:-- (i) Shri D.B. Dhru 37% (ii) Shri K.M. Parekh 37% (iii) Shri K.J. Shah 26% This firm, Pathare Dhru & Co., was granted registration in the assessment year 1985-86 and such registration was continued fo....
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....] 181 ITR 368. 5. The learned departmental representative, on the other hand, argued that there was a dissolution of the firm Pathare Dhru & Co. on 31-12-1985 and a new firm came into existence on 1-1-1986. According to him, neither registration of the old firm nor the continuation of registration of that firm in an earlier year is relevant for deciding the issue now raised by the assessee. The learned departmental representative also pointed out that the income cannot be criterion for deciding in whose hands the income should be clubbed. Reliance was placed on to the decision of the Madras High Court in Balu Readymade Stores v. CIT [1994] 207 ITR 461 for the proposition that there is an interlacing and/or interlocking of the management, finance and other incidents of the respective professional firms. According to him, inasmuch as M/s. Dhru & Co. appears as creditor of more than Rs. 1,20,000 in the books of M/s. Pathare Dhru & Co., the interlacing and interlocking of the finance would be established. The learned departmental representative also argued that there is interlacing and interlocking by way of common management and control. It is quite possible that the same partners ....
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....only one firm in law." The above observation was later held to be a mere obiter dictum by Shri Chagla J. (who had earlier concurred with the earlier proposition) in the case of Jesingbhai Ujamshi v. CIT [1950] 18 ITR 23 (Bom.) wherein it was observed : " Therefore, we disagree with the Tribunal in the view it has taken in law and we are of the opinion that there is nothing in law to preclude common partners constituting two separate firms for the purposes of the Income-tax Act." The Andhra Pradesh High Court in M. Venkata Narasimha Rao & Co.'s case first took a view that a firm has no separate legal existence apart from its partners and the income of the two firms having same partners with identical shares deserves to be aggregated. The above decision was overruled by a Full Bench of the Andhra Pradesh High Court in G. Parthasarathy Naidu & Sons' case. The Full Bench concluded that the answer to the question whether two or more partnerships or firms constituted under different deeds of partnership are, in reality, one partnership or not will depend on the cumulative effect of the partnerships and the businesses, their nature, character and identity coupled with the factum ....
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....iness. The funds of cloth business were used for the construction of the theatre. In the firm's books of the cloth business, the theatre building was shown as an investment of the firm doing cloth business. The facts before us are different from the facts before the Madras High Court in the case of Balu Readymade Store's case. Before the Kerala High Court in Sree Radhakrishna Industries' case, the facts were that the two firms of the same two partners were engaged in the business of manufacture and sale of tiles under two different names. The department clubbed the income of these two units for the purpose of assessment. The Tribunal found that the two firms were independently formed at different times. The factories were situate in different places with separate accounting facilities. There was no common business organisation or unity of finance. The Tribunal held that the income of the two different firms should not be clubbed together. The Kerala High Court directed a reference at the instance of the department and answered the question in favour of the assessee and against the department. The facts of the case before us are identical to the facts that were there before the Kera....
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....r person or firm or in partnership or as agent, consultant or employee of any other firm act as or do any work done by Solicitors and Advocates for any person, firm or company who shall have been the clients of the said partnership firm of M/s. Pathare Dhru & Co., and he shall not for the like period directly or indirectly either alone or jointly with any person or firm or partnership or as agent consultant or employee of any firm undertake professional work or render professional services as solicitor and advocate in respect of the following types of matters before the Court and Authorities : (i) Company matters. (ii) Trade Mark & Patent Matters. (iii) Shipping matter in Admiralty and Vice Admiralty Jurisdiction of the High Court. (iv) Labour matters in Industrial Court. (v) Taxation matters before the Income-tax Authorities. (vi) Foreign Collaboration. (vii) Customs & Central Excise and Octroi matters. (viii) Foreign Exchange matters. (ix) Court matters relating to the above, but nothing contained in these provisions shall prevent the said Party of the First Part from proceeding to make recovery/recoveries of pending matters of Pathare & Co., and mat....
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....ents (P.) Ltd [1971] 82 ITR 902 (SC) ; (3) CIT v. Lahoty Brothers Ltd. [1951] 19 ITR 425 (Cal.) ; and (4) Sree Hanuman Trading Co. v. CIT [1980] 125 ITR 1 (Ker.). 10. The departmental representative, on the other hand, argued that the expenditure is for acquiring a benefit of enduring nature and, therefore, it shall be treated as a capital. Reliance was placed on to the following decisions : (1) Devidas Vithaldas & Co. v. CIT [1972] 84 ITR 277 (SC) ; and (2) CIT v. Hari Chand [1993] 199 ITR 277 (All.). 11. The assessee's learned representative, in reply, pointed out that the facts of the case in Devidas Vithaldas & Co.'s case relate to payment for goodwill and, therefore, not applicable to the present issue. 12. We have considered the rival submissions in the light of the material placed before us. The facts before the Calcutta High Court in Lahoty Bros. Ltd.'s case were that the assessee was a private limited company and carried on business as dealers in petroleum and mobile oil. It was also a sole agent of a company for distribution of kerosene oil in a particular area. Prior to the taking up of the business by the assessee, it was run by a joint family. By a....