1957 (8) TMI 24 - HC - Income Tax

Summary

Issues Involved:
1. Whether Mahaliram Santhalia was a partner in Benares Steel Rolling Mills in his individual capacity or as a representative of the firm Radhakissen Santhalia.
2. Whether the entire share of profits from Benares Steel Rolling Mills can be included in the individual assessment of Mahaliram Santhalia.

Issue-wise Detailed Analysis:

1. Capacity of Mahaliram Santhalia as a Partner:
- The partnership deed of Benares Steel Rolling Mills described Mahaliram Santhalia as "Mahaliram Santhalia, of the firm of Messrs. Radhakissen Santhalia of the third party."
- Mahaliram Santhalia signed the registration application of Benares Steel Rolling Mills as an individual partner, not disclosing his representative capacity.
- The Appellate Assistant Commissioner accepted that Mahaliram was a partner in Benares Steel Rolling Mills as a representative of Radhakissen Santhalia, based on an agreement dated April 3, 1944.
- The Tribunal, however, held that since Mahaliram signed the registration application as an individual partner and did not disclose his representative capacity, he could not later contend that he was a partner in a representative capacity.

2. Inclusion of Entire Share of Profits in Individual Assessment:
- The Income-tax Officer included Mahaliram's share of profits from Benares Steel Rolling Mills in his individual assessment.
- The Appellate Assistant Commissioner, Mr. K.N. Bose, excluded this income from Mahaliram's individual assessment, stating it belonged to the firm of Radhakissen Santhalia.
- Another Appellate Assistant Commissioner, Mr. M.K. Banerji, upheld the inclusion of the income in Mahaliram's individual assessment, citing the second proviso to section 30 of the Income-tax Act, which bars questioning the apportionment of income in personal assessments.
- The Tribunal supported Mr. Banerji's view, stating that the registration of Benares Steel Rolling Mills was based on the representation that Mahaliram was an individual partner, and thus, he was precluded from claiming otherwise in his personal assessment.
- The Tribunal also noted that Radhakissen Santhalia did not include any income from Benares Steel Rolling Mills in its returns.

Judgment:
- The High Court affirmed the Tribunal's decision, holding that the entire share of profits from Benares Steel Rolling Mills should be included in Mahaliram's individual assessment.
- The Court emphasized that the registration of Benares Steel Rolling Mills as a firm with individual partners, including Mahaliram, mandated that his share of the firm's income be included in his personal income under section 23(5)(a) of the Indian Income-tax Act.
- The Court rejected Mahaliram's new argument that the income was diverted to Radhakissen Santhalia by an overriding title, stating that any agreement between Mahaliram and his partners in Radhakissen Santhalia was a voluntary disposition of his income.
- The Court concluded that the second proviso to section 30(1) barred Mahaliram from raising the issue of apportionment in his personal assessment.

Conclusion:
- The High Court answered the referred question in the affirmative, confirming that the entire share of profits from Benares Steel Rolling Mills can be included in the individual assessment of Mahaliram Santhalia.
- The Commissioner of Income-tax (Central), Calcutta, was awarded the costs of the reference.