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TMI Blog1972 (9) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... that a firm was not an entity known in law which was capable of owning property - Question answered in the affirmative - - - - - Dated:- 21-9-1972 - Judge(s) : SABYASACHI MUKHERJEE., SANKAR PRASAD MITRA. JUDGMENT SABYASACHI MUKHARJI J.-By this reference under section 66(1) of the Indian Income-tax Act, 1922, the following question has been referred to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the assessee-firm was the owner of premises No. 5, Clive Row, Calcutta, and that the provisions of section 9(3) of the Indian Income-tax Act, 1922, had no application in this case?" The assessment years concerned in this reference are 1958-59, 1959-60 and 1960-61 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hares was accepted by the Income-tax Officer and the rental income from the property was excluded from the total income of the firm for the aforesaid three years. Thereafter on calling for and examining the records of the proceedings for the aforesaid assessment years, the Commissioner of Income-tax, West Bengal, considered the assessment orders to be erroneous and prejudicial to the interests of revenue and he issued a show-cause notice under section 33B of the Indian Income-tax Act, 1922, on 23rd March, 1964, as to why action should not be taken under the said section. The assessee showed cause. The Commissioner considered the cause shown. It was contended before the Commissioner on behalf of the assessee that a firm was not a legal entit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also been debited in the accounts and at the end of each year the net income from the property along with the income from other business activities carried on by the firm had been divided between the two partners and credited into their respective personal accounts. The Commissioner, therefore, held that, as the property had been purchased in the name of the firm, the purchase consideration had been paid by the firm out of the capital invested by the partners in the firm and the house property had been shown as an asset of the firm in the balance-sheets of the three accounting years, the property belonged to the firm. According to the Commissioner, there was nothing in the Partnership Act which precluded a firm from acquiring or owning a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under which their business is carried on is called the firm name. Under section 14 it is provided that subject to the contract between the partners, the property of the firm includes all property rights and interest in property originally brought into the stock of the firm, or acquired by purchase or otherwise, by or for the firm or for the purposes and in the course of the business of the firm and includes also the goodwill of the business. It is also provided that unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm. Section 19 deals with the implied authority of the partner to act as an agent of the firm and it is prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 3(42) of the General Clauses Act includes unincorporated associations or body of persons like a firm. Therefore, a firm would also be a person according to the definition of the Indian Income-tax Act and would be liable to tax as the owner of the property. This view was taken by the Delhi High Court in the case of Bhai Sunder Das Sons v. Commissioner of Income-tax, wherein it was further observed that the technical view of the nature of partnership could not be taken in applying the law of income-tax so far as exigibility of tax of the income from property owned by a firm was concerned. For the purpose of section 9 of the Indian Income-tax Act, 1922, property owned by a firm had to be treated as the property of the firm and not of its ..... X X X X Extracts X X X X X X X X Extracts X X X X
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