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Issues:
The judgment involves determining whether two partnership firms, Shree Annapurna Electric Co. and Shree Annapurna Udyog, should be considered as separate entities for income tax purposes or if their incomes should be clubbed together. Analysis: The case pertains to the assessment years 1975-76, 1976-77, and 1977-78, where the question of law raised was whether the Appellate Tribunal was correct in holding that the two partnership firms were separate entities and excluding the income of Shree Annapurna Udyog from being taxed with Shree Annapurna Electric Co. The Assessing Officer initially treated the two firms as one due to common partners and added Udyog's income to Electric Company's income. However, the Appellate Assistant Commissioner and the Appellate Tribunal found the firms to be distinct based on various factors. The Appellate Authority and the Tribunal considered several crucial factors to establish the separation of the two firms. These factors included the different business activities conducted by each firm, the distinct locations of their offices, separate books of account, different sales tax registration numbers, and varying numbers of employees. Citing a precedent set by the Bombay High Court, the authorities concluded that the firms were independent entities. The Revenue contended that the common partners and the equal sharing of profits and losses should be decisive in considering the firms as one entity. However, the court disagreed, referencing a Supreme Court decision that emphasized the importance of partnership agreements and the intention of the partners in determining separate partnerships. The court highlighted that mere common partnership does not automatically lead to the conclusion that the firms are the same for tax purposes. Ultimately, the court upheld the findings of the lower authorities, emphasizing that the determination of the firms' separateness was a factual matter. The court ruled in favor of the assessee, concluding that the incomes of the two firms should not be clubbed together for taxation purposes. The judgment was sent to the Appellate Tribunal for further action based on the court's decision.
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