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TMI Blog1961 (9) TMI 94X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm, and the partnership deed, which was drawn up on the 22nd January, 1923, showed six persons as partners including the assessee's father and the assessee. A fresh partnership deed again was executed on 17th February, 1928, between six persons including the assessee's father and the assessee. Under the terms of this partnership deed, the shares of these two partners were as under : (1) the assessee's father, Gulabdas Dharamdas Navlakhi, was to have a share of eight annas in the 20 annas of a rupee. (2) the assessee's share was fixed at four annas in the 20 annas of a rupee. 2. The remaining share of profits was divided amongst the other four persons in proportions which it is not necessary to state in detail. The deed also stated that one of the six persons, namely, Balubhai Girjashankar Joshi, had retired as a partner from the said firm from 7th January, 1920, subject to certain conditions, and the business since 1st January, 1923, had been continued by the remaining five partners. It was agreed between the partners that in consideration of the long connection of the retired partner in the firm, and in consideration of his having relinquished h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, etc., were to be the property of the assessee. The other material provisions in the deed also were similar to the provisions of the deed of 1928, which we have already stated, giving the same position and control to the assessee as was given to his father in the earlier partnership deed. This partnership deed was followed by another partnership deed on 18th February, 1939, between five persons, four of whom were the same as in the deed of 1933 and the fifth partners, four of whom were the same as in the deed of 1933 and the fifth partner, Jayantilal Gulabdas Navlakhi, was a new partner. The material clauses of this partnership deed were similar to those in the earlier partnership deeds of 1933 and 1928. In September, 1945, one of the partners, Nanalal Motilal Joshi, died and a fresh partnership deed was executed, taking Arvindlal Bhaidas Ruvala as a partner in the firm. The material clauses in this partnership deed also were similar to those in the earlier deeds. In 1947, Jayantilal Gulabdas Navlakhi retired and a new partnership deed came into existence. Then in 1951, another partner, Gatulal Dharamdas Navlakhi, having died a fresh deed of partnership was executed between three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as embodying an agreement of partnership and has granted registration to the firm. He does not dispute that the mere circumstance that the registration has been granted in the past does not disentitle the Income Tax authorities from declining to grant registration on future occasions. But the circumstance that the agreement had been accepted as an agreement of partnership and the Income Tax authorities were satisfied about the same in the years past, coupled with the further circumstance that there has been no change in the conduct of the parties, will show that there was hardly any reason for the Commissioner of Income Tax to come to a contrary conclusion and to refuse registration during the present assessment year. Now, partnership as defined in section 4 of the Partnership Act is the relation between persons who have agreed to share the profits of business carried on by all or any of them acting for all. The two essential conditions which are necessary to form the relation of partnership is that there should be an agreement to share the profits as well as the losses of the business, and that each of the partners should be acting as the agent of all. Whether these two condi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision for the sharing of the profits in the business in proportion to the shares. Under clause 12, provision is made requiring the partners to deposit with the firm such amounts as may be determined by the assessee. Clause 14 provides for all the partners giving their entire attention to the business of the partnership; and clause 15 forbids any of them from engaging directly or indirectly in any business other than that of the partnership. It view of these provisions, it seems to us that there is no reason why the agreement in the present case should be held not to be one between partners but between an employer and an employee. Mr. Joshi, learned counsel appearing for the revenue, has invited our attention to certain parts of the partnership deed. He has pointed out that in the preamble it has been clearly mentioned that the entire goodwill as well as the stock-in-trade, furniture, goodwill, articles, things and all other assets of the firm are in the sole ownership of the assessee, and he has the absolute power to deal with and dispose of the same by will or otherwise as he may deem fit and proper. This, Mr. Joshi says, is perfectly consistent with the entire concern being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only in the nature of remuneration fixed under an agreement of employment. In our opinion, the fact that some of the terms of the deed give enlarged powers of management and control to one of the partners, who have brought in all the finances and holds the entire capital of the firm, may resemble the powers of an employer. Still, however, they will not be sufficient to conclude that the real agreement between the parties is not that of partners, but that of master and servant, if the two essential conditions required to constitute a partnership have been satisfied. It is no doubt true that whether the said conditions are satisfied or not must, in any given case, be determined by looking to all the facts. The argument that some of the facts are also consistent with the relationship of master and servant will not, however, avail to negative the existence of partnership unless the said facts are inconsistent with the said relationship. In our opinion, the enlarged powers given to one of the partners are not inconsistent with the relationship of partners, since the partners to the agreement are entitled to fix such terms as they like between themselves. Both Mr. Kolah for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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