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TMI Blog1977 (1) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that only 40% of the salary and interest payable to the assessee, Shri M. L. Mahindra, by the firm, M/s. Amsoi Tea Estate, of which he is a partner, should be assessed to tax ? " The facts of this case may be briefly stated as follows : The assessee, M. L. Mahindra, is a partner in the firm, M/s. Amsoi Tea Estate, which derives income from a tea garden. His share of profit from the firm includes salary and interest. Since the salary and interest were received from the firm having income from the tea garden, the assessee claimed that 60% of his salary and interest also should be exempted. The assessee contended that since 60% of the total income was to be exempted according to rule 8 of the Income-tax Rules, 1962, and since his s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable to the assessee by the firm, M/s. Amsoi Tea Estate, should be assessed to tax and the Tribunal dismissed all the six departmental appeals by its consolidated order dated December 12, 1972. On the above facts the above-mentioned question of law has been referred. In Income-tax Reference No. 25 of 1973, the Tribunal has referred the following question of law under section 256(1) of the Act to this court for decision : " Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in cancelling the order of the Additional Commissioner of Income-tax that 100% of the salary and interest should be assessed in the hands of the firm and allocated for the purpose of arriving at the share income to be assessed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as they were prejudicial to the interest of the revenue, initiated proceedings for revising the assessment orders under section 263 of the Act. The Additional Commissioner of Income-tax held that the immediate source of the salary was the service and that of the interest, the user of the money. According to the Additional Commissioner they did not partake the character of the income of the firm, whose income may be only partly taxable on the ground that part of its income was agricultural income. The Additional Commissioner, therefore, directed that the correct procedure to be adopted in computing the income in these cases was to take 40% of the total income derived from the tea garden, then add back the entire interest and salary pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. We have perused the judgment of the Supreme Court in the case of Commissioner of Income-tax v. R. M. Chidambaram Pillai [1977] 106 ITR 292 and we find that the present two references are covered by the said decision of the Supreme Court, wherein the Supreme Court has observed : " Here the first thing that we must grasp is that a firm is not a legal person even though it has some attributes of personality. Partnership is a certain relation between persons, the product of agreement to share the profits of a business. ' Firm ' is a collective noun, a compendious expression to designate an entity, not a person. In income-tax law a firm is a unit of assessment, by special provisions, but is not a full person which leads to the next step t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to exigibility that rule 24 admittedly confers on the agrarian portion ............ It follows that by statutory dichotomy, 60% of the tea income is agricultural in character and Central income-tax cannot break into its inviolability. This conceded, the flexible arrangement among partners regarding distribution of this sum may take many forms but the essential agricultural character and consequential legislative immunity cannot be lost because of tags and labels : ' That which we call a rose, by any other name would smell as sweet. ' Needless to say, the position is different if the situation is of a stranger--not a partner--drawing a salary. " Having considered the decision of the Madras High Court in the case of Mathew Abraham [1964] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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