1963 (4) TMI 62 - SC - VAT and Sales Tax

Whether in the facts and circumstances of the case the common manager should be assessed under section 13 of the Bihar Agricultural Income-tax Act in respect of the agricultural income-tax payable by the persons jointly liable? Held that - Appeal allowed. We come to the conclusion that the answer which the High Court gave to the question was not correct.

Summary

Issues Involved:
1. Nature of the assessee's concern: partnership firm or co-ownership concern.
2. Applicability of Section 13 of the Bihar Agricultural Income-tax Act to the assessee.

Issue-wise Detailed Analysis:

1. Nature of the Assessee's Concern: Partnership Firm or Co-ownership Concern

The primary issue was whether the Champaran Cane Concern should be classified as a partnership firm or a co-ownership concern. The assessee claimed it was a co-ownership concern with two co-owners, Padampat Singhania and Bishundayal Jhunjhunwala, who appointed a common manager, S. K. Kanodia, for managing the agricultural operations. The High Court, however, concluded it was a partnership firm based on the facts that the two co-owners lived in different states and belonged to different families, and that profits were distributed according to their respective shares.

The Supreme Court disagreed with the High Court's conclusion. It emphasized that the appointment of a common manager by the two co-owners did not necessarily indicate a partnership. The Court highlighted that co-ownership does not require an agreement, whereas partnership does. The Court found no evidence of an agreement to form a partnership or any indication that one co-owner acted as an agent for the other, which is a key characteristic of a partnership under the Indian Partnership Act, 1932. The Court noted that the returns filed by the assessee described its status as a co-ownership concern and that the designation of the concern as a "firm" in the returns was not conclusive evidence of a partnership.

2. Applicability of Section 13 of the Bihar Agricultural Income-tax Act

Section 13 of the Act states that where a common manager holds land from which agricultural income is derived on behalf of persons jointly interested in the land, the common manager shall be assessed for the aggregate sums payable as agricultural income-tax by each person. The assessee argued that this section applied to their case, as they were a co-ownership concern managed by a common manager.

The Supreme Court agreed with the assessee's contention. It noted that the Solicitor-General conceded that Section 13 would apply if the concern was a co-ownership. The Court found that the facts and circumstances established in the case were consistent with the assessee's claim of being a co-ownership concern. The Court concluded that the High Court erred in determining that the assessee was a partnership firm and, consequently, in not applying Section 13.

Conclusion:

The Supreme Court concluded that the Champaran Cane Concern was a co-ownership concern and not a partnership firm. Therefore, Section 13 of the Bihar Agricultural Income-tax Act applied, and the common manager should be assessed for the agricultural income-tax payable by each co-owner. The appeals were allowed, and the judgment of the High Court was set aside. The question referred to the High Court was answered in favor of the assessee, and the assessee was entitled to costs throughout.