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Issues: Assessment of partnership firm for registration under section 26A of the Income-tax Act, 1922 for the assessment year 1960-61.
Analysis: The judgment delivered by the High Court of Madras pertained to the assessment of a partnership firm for registration under section 26A of the Income-tax Act, 1922 for the assessment year 1960-61. The firm in question was engaged in forest coupe contracting business with multiple partners and branch offices. The firm's partnership deed allowed individual partners to enter into contracts in their names for the benefit of the firm. The Income-tax Officer initially refused registration under section 26A, citing various reasons. However, the Appellate Assistant Commissioner and the Tribunal overturned this decision. The Tribunal dismissed the department's arguments that the partnership was formed to work contracts obtained through rigging and knock-out bids, and that such contracts were against public policy. The Tribunal found no evidence of such activities and concluded that the firm's exploitation of coupe contracts obtained in the names of individual partners was not prohibited by the Forest Act. The High Court concurred with the Tribunal's findings, stating that the contracts between individual partners and the Government authorized the firm to exploit the forest, as per section 18. The court emphasized that the exploitation of contracts by the firm was not illegal but rather authorized and within the contractual contemplation. The breach of certain clauses in the contracts might constitute a breach of contract but not illegality under the Forest Act. Therefore, the High Court held in favor of the assessee, affirming the Tribunal's decision to grant registration to the partnership firm under section 26A of the Income-tax Act, 1922 for the assessment year 1960-61. The court also awarded costs and counsel fees to the assessee in each reference.
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