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TMI Blog1986 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, having found that Sri Goverdhana Finance Corporation, Kadiri, has satisfied the requirements that are enjoined by law to claim registration, the Appellate Tribunal is justified in law in holding that its income and that of Sri Krishna Finance Corporation be clubbed together, and assessed collectively ? " The question referred in R.C. No. 152 of 1982 is the following: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the assessee-firm is entitled to the benefits of registration for the assessment year 1972-73 ? Both the references are made under section 256(2) of the Income-tax Act, 1961. The facts leading up to these references are the following: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Corporation " so clubbed for the assessment year 1974-75 was Rs. 10,390. The Income-tax Officer came to the above conclusion on the following seven grounds : " (1) the firm has been constituted with the close relatives of the partners of M/s. Sri Krishna Finance Corporation; (2) the business of the firm was run on the same lines as those of M/s. Krishna Finance Corporation and there was no specific reason for the wives of the close relatives of the family for starting a rival business; (3) the business premises were the same as the business premises of the main firm, i.e., M/s. Sri Krishna Finance Corporation; utilising the services of the clerks and stationery of M/s. Sri Krishna Finance Corporation ; (4) this firm con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration the fact that " Sri Krishna Finance Corporation " was carrying on money-lending business with four partners, that " M/s. Sri Goverdhana Finance Corporation " was constituted with the wives of two partners and the married daughter of one partner and that inasmuch as the three lady partners have contributed their own capital as is evidenced from their depositions recorded by the Income-tax Officer, it held, it cannot be said that they are " make-believe " partners. The Tribunal further opined that the proposition that the wives or daughters of the partners cannot constitute another partnership is not an acceptable proposition. Finally, it held on the first question: "On the facts and in the circumstances, we must hold that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for " 1974-75 "). We have perused the judgment and order of the Tribunal and we must say at once that the judgment is not at all happy. The reasons for which the Tribunal held that the income of " Sri Goverdhana Finance Corporation " should be clubbed with the income of " Sri Krishna Finance Corporation ", if true, militate against the genuineness of the firm and disentitle it from registration. If the Tribunal was of the opinion that " Sri Goverdhana Finance Corporation " was a genuine firm-which is the inference that flows from its finding that it is entitled to registration-then the Tribunal should have held that its income-cannot be clubbed with the income of " Sri Krishna Finance Corporation ". Conversely, from the finding that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the finding of the Tribunal-the correctness of which has not been disputed before us-the three ladies who are partners in the firm " Sri Goverdhana Finance Corporation " have contributed their own capital. It appears that these three ladies have actually contributed to a total extent of Rs. 45,000 in the year 1971. Indeed, the partnership deed itself shows that they were supposed to contribute the capital in certain specified amounts to a total extent of Rs. 60,000. Now, the result of the direction given by the Tribunal, viz., clubbing of the income, is that the three ladies are totally deprived of the benefit of their capital. We do not find a direction in the order of the Tribunal that these three ladies should be given a reasonable re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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