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TMI Blog1971 (8) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... J. B. Gupta was running the Chitra Cinema as his sole proprietary business. Smt. Sulabha Devi had advanced two sums of Rs., 20,000 and Rs. 14,000, total Rs. 34,000, to her husband,Jyoti Bhushan Gupta, on 9th February, 1952, and 23rd February, 1952, respectively. These amounts were advanced on condition that, in case Sri J. B.Gupta was unable to repay the loan, Smt. Sulabha Devi would become entitled to the profits of the cinema business with effect from Diwali of Sambat 2013.Gupta did not repay the loan. Certain differences also arose between the members of the family, with the result that Sri J.; B. Gupta and Smt. Sulabha Devi for self and as guardian of her minor sons, Anil Kumar, Sushil Kumar, Chandra Shekhar and Ashok Kumar, referred their disputes to the arbitration of one Sri Radha Raman Prasad. During the course of arbitration proceedings, Anil Kumar became major and he also applied to the arbitrator that his share in- the joint properties should be separated. The arbitrator made an interim award on 5th October, 1956, and directed that as from Diwali of Sambat 2013, Sulabha Devi and Anil Kumar Gupta will be entitled to a share of 0-8-0 and 0.4-0, respectively, in the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee appeared to be with the object of, getting over the adverse finding regarding the said loan and to superimpose upon the Tribunal the finding of the arbitrators that Sulabha Devi had lent Rs. 34,000 to her husband. (2) According to the agreement, by which the dispute was referred to the arbitrator, the case of the parties was that they had separated and that they wanted partition of their joint family properties. The case of Sri Jyoti Bhushan. Gupta throughout had been that the cinema business was his sole proprietary, business and that it was not joint family business. In the circumstances no question of partitioning that business arose. (3) The sole consideration on which the partnership was said to have been entered into was the loan of Rs. 34,000 which was disbelieved by the Tribunal in earlier proceedings and there was, therefore, absolutely no reason why the Tribunal should take a different view of the matter in these proceedings. (4) There was absolutely no evidence on the record to prove that Smt. Sulabha Devi managed the partnership business; " As, in the opinion of the Tribunal, the recitals in the partnership deed, which related to the very fact of form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The persons who enter into a partnership with one another are called individually partners. and collectively a firm and the name under which their business is carried on is called the firm name. In the case before us, the deed dated 2nd of May, 1957, clearly recites an agreement between Sri Jyoti Bhusban Gupta, Smt. Sulabha Devi and Sri Anil Kumar Gupta, that the business in the name of Chitra Cinema will be carried on on their behalf as a partnership concern with the object, that the executants will be entitled to share the profits and losses of the business in the proportion mentioned in the deed. The document, therefore, clearly evidences the formation of a partnership firm within the meaning of the Indian Partnership Act. It cannot, therefore, be said that the firm was not genuine on the first ground. Learned counsel for the revenue contended that, although the document dated 2nd of May, 1957, purports to bring into existence a partnership, in reality it was a cloak for some other transaction. In fact, the business of Chitra Cinema continued to be run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tness of which cannot be questioned before us. The document dated 2nd May, 1957, can be divided into two parts (1) recital about the reason why the parties entered into an agreement to run the business in partnership, and (2) the agreement arrived at between the parties about the manner in which the business was to 'be run and its profit shared by the executants. Even if it be a fact that the recitals made in the document about the reason why the agreement had been entered into is incorrect, it does not mean that in fact there was no agreement between the parties to run the business on behalf of all of them and, to share its profits in particular proportion. The fact that the reason given for arriving at an agreement is wrong may be taken into consideration in conjunction with other circumstances, for coming to the conclusion that in fact there was no partnership agreement, and that the agreement was a sham transaction. It may be possible to conclude that the partnership agreement was sham if ,there are 'circumstances to indicate that profits of business were not being shared by the, partners in the manner provided in the partnership deed or that the business was being carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ership Act will apply and a firm would exist. 'The partnership deed dated 2nd of May, 1957, provided that Sri Anil Kumar Gupta was to look after the proper working, management, maintenance, etc., of the cinema and was to consult Sri Jyoti Bhushan Gupta and Smt. Sulabha Devi from time to time. The partnership deed does not place the responsibility for actual running of the business on Smt. Sulabha Devi. In the circumstances, the fact that Smt. Sulabha Devi did not participate in running the business does not go to show that in fact there was no agreement between the parties to run the business in partnership or that the agreement dated 2nd May, 1957, was a sham agreement. In our opinion, a wrong mention of the reason in the partnership deed for bringing into existence a partnership and that certain steps, by way of arbitration, were taken before entering into the agreement which were not consistent with the finding recorded by the income-tax authorities in earlier proceedings, coupled with the fact that Smt. Sulabha Devi did not participate in the management and running of the partnership business, cannot be evidence of the fact that the partnership agreement as contained in the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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