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TMI Blog1996 (5) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... ership firm comprising seven partners being members of an erstwhile Hindu undivided family started a liquor business in 1961, in the name and style of Brijnandan Prasad and Sons. In 1966, the very same persons started another business in contract work purportedly under a new partnership but in the same name. The income from the two businesses was assessed separately up to 1976-77. In the year 1977-78, which is the assessment year under reference, the Income-tax Officer tagged the income of the other firm, Brijnandan Prasad and Sons (Contractor), with the income of the assessee-firm and made the assessment. He did so on the basis of his finding that both the firms had the same partners sharing the profits in the same ratio, having also the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would appear, has been rendered in the context of the provisions of the Indian Partnership Act. So far as the Income-tax Act is concerned, as rightly pointed out by Mr. Pawan Kumar on behalf of the assessee, although a partnership firm may not have a juristic entity like a company under the Companies Act, it nevertheless possesses a separate legal personality and existence of its own de hors its partners. Section 4 of the Income-tax Act creates a charge upon every person with respect to its total income of the previous year subject to the provisions of the Act. The term "person" is defined under section 2(31) to include, amongst others, a firm as well. There cannot, thus, be any doubt that a firm has a separate assessable entity for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrange his affairs that his tax liability is reduced to the minimum by adopting a legal device permissible under the law. Such a device cannot be called an attempt to evade tax as long as the action is not contrary to law. Reference may also be made to Kelvinator of India Ltd. v. State of Haryana [1973] 32 STC 629 ; AIR 1973 SC 2526, wherein similar observations were made to the effect that there is nothing illegal or impermissible to a party so arranging its affairs that the liability to pay tax is not attracted or that the brunt of taxation is reduced to the minimum. We must hasten to observe that the claim of the assessee as to the separateness of the firms is not to be taken on its face value. It is always open to the income-tax auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the deed of partnership dated October 1, 1968. Later, on November 26, 1968, another partnership was formed by the same coparceners of the erstwhile Hindu undivided family. The funds which were invested in the business, had been allotted to the shares of the coparceners on partition. The Andhra Pradesh High Court held that in the absence of any evidence regarding interlacing or inter-locking of funds between the two firms, the finding of the Tribunal that their incomes should not be clubbed together, cannot be said to be erroneous. A Full Bench of the Kerala High Court in CIT v. C. A. Ouseph and Sons [1985] 154 ITR 598 noticed with approval the aforesaid decision of the Andhra Pradesh High Court and came to a similar conclusion. In that case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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