9911796707
|
Home
Issues Involved:
1. Whether the share of profits received by Rijhumal and Hiranand from the three mill partnerships was liable to be included in their individual assessments or should be considered as income of Messrs. Valiram Sons. 2. Whether the portions of the share of profits from the mill partnerships which went to other partners of Valiram Sons were diverted by overriding title or allowable as deductions in computing the assessee's total income. Issue-Wise Detailed Analysis: Issue 1: Inclusion of Profits in Individual Assessments The primary issue was whether the share of profits received by Rijhumal and Hiranand from the three mill partnerships should be included in their individual assessments or treated as income of Messrs. Valiram Sons. The court examined the partnership deeds and the conduct of the parties involved. The partnership deed of Messrs. Valiram Sons, dated April 10, 1946, indicated that Rijhumal and Hiranand were financing partners, while the other eleven partners were working partners with no obligation to bring in capital. The court noted that Rijhumal and Hiranand had entered partnerships with Laxmichand Durlabhji and Manilal Durlabhji for New Prabhat Silk Mills Nos. 1 and 2 and Anant Silk Mills. A joint declaration made by Rijhumal and Hiranand on August 19, 1947, stated that their shares in these partnerships were held for the benefit of themselves and the other partners of Messrs. Valiram Sons. The Income-tax Tribunal initially rejected Rijhumal and Hiranand's contention, relying on the Supreme Court judgment in Dulichand Laxminarayan v. Commissioner of Income-tax, which held that a firm is not a person and cannot enter into a partnership. However, this High Court held that the Dulichand decision did not apply because Rijhumal and Hiranand were partners in their individual capacities, not as representatives of the firm. The Tribunal was directed to draw up a further statement of the case, which concluded that the shares in the mill partnerships were held by Rijhumal and Hiranand on behalf of Messrs. Valiram Sons. The court referred to the Supreme Court judgment in Murlidhar Himatsingka v. Commissioner of Income-tax, which established that when a partner enters a sub-partnership, the profits and losses of the head-partnership become assets of the sub-partnership. The court found overwhelming evidence, including the conduct of the parties and the sharing of profits and losses, to support the agreement that Rijhumal and Hiranand represented Messrs. Valiram Sons in the mill partnerships. Thus, the court answered question No. 1 in the affirmative, holding that the Tribunal was justified in assessing the income as that of Valiram Sons. Issue 2: Diversion of Profits by Overriding Title This issue was to be considered only if question No. 1 was answered in the negative. Since the court answered question No. 1 in the affirmative, it did not consider or answer question No. 2. Conclusion: The court concluded that the share of profits received by Rijhumal and Hiranand from the three mill partnerships should be treated as the income of Messrs. Valiram Sons, not their individual income. Consequently, question No. 2 regarding the diversion of profits by overriding title did not need to be addressed. The respondent was ordered to pay the applicant's costs.
|
