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TMI Blog1981 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 3. On 1st April, 1972, the business of MMGC was split up with the formation of another firm in the name and style of M/s Bansal Carriers,the firm. At this stage, it may be necessary to mention that MMGC admitted Kewal Krishan son of Miri Mal as the fifth partner with effect from 1st April, 1972. This aspect is considered important in the sense that though in (MMGC) Kewal Krishan has been considered as a genuine partner, he was hold as a bogus one in relation to the firm. After split up of the business of MMGC, as stated above, two partnership deeds were executed for two different firms on18th April, 1972. The deed in relation to the firm stated that Gian Chand and Subhash Chand sons of Miri Mal, Lajwanti Devi wife of Miri Mal, Saroj Bansal wife of Prem Sagar and Kewal Krishan son of Miri Mal formed a partnership with effect from 1st April, 1972 to carry on in partnership business of pubic carriers and that of running of oil tankers. A clarification may be stated here that all along somehow there has been confusion with the IT authorities inasmuch as, according to them, there was no split up of the business but the firm was floated as a rival concern to MMGC. After 1st April, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al position that the onus to prove that the firm was a benami of MMGC was entirely on the revenue and in sub-para(2) of para 3 of the order, reproduced below, he stated '...it is quite probably that the allied concern M/s Miri Mal Gian Chand, Sunam, have allowed the assessee-firm doing the same business which was being done by it prior to it in the same premises unless it is a benami of it.": " Order u/s 185(1)(b)— Assessee filed an application in form No. 11 on 2nd Feb, 1979 alongwith original partnership deed for registration of firm. The instrument of partnership was executed on 18th April, 1972, and was made effective w.e.f. 1st April, 1972. "Assessee-firm carried on partnership business of public carriers and that of running of oil tankers. Kewal Krishan, partner, accompanied with Sh. S.K. Bansari, Advocate, attended the office and the case was discussed. The constitution of the firm has been shown as under: 1. Gian Chand s/o Miri Mal 30% 2. Subhash Chand s/o Miri Mal 30% 3. Lajwanti Devi w/o Miri Mal 30% 4. Saroj Bansal w/o Prem Sagar 10% 5. Kewal Krishan s/o Miri Mal 20% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artner in M/s Miri Mal Gian Chand and Smt. Saroj Bansal w/o Prem Sagar who is a partner in M/s. Miri Mal Gian Chand have also not provided any capital in the firm. It is, therefore, evident that both the businesses are inter-related. The business of the firm is also in the same line as that of allied concern M/s. Miri Mal Gian Chand upto the asst. yr. 1972-73. There are no specified reasons for starting the same business which provided by the two partners in the shape of tankers which owned by the allied concern. Thus, it showed that the assessee firm employed the capital of the allied concern and also continued the business of said allied concern. 3. The statements of two lady partners have been recorded. They have deposed that they have made no investment and they are house wives. No evidence has been shown to prove that they are working partners. Thus they are only sleeping partners. They are not expert in this line of business and they are not running the conduct of the business of the firm. The business of the firm is being carried on at the premises of the petrol-pump-show-room belonging to M/s. Miri Mal Gian Chand. No separate office has been maintained. The entire busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine but only a benami. The Id. counsel of the assessee has drawn my attention to the case of S.S.A. Gangamirthammal Co. vs. CIT (169) 74 ITR 473 (Mad) in which registration was allowed. This case is distinguishable from the facts of the present case and does not help the assessee. In this case, four ladies were partners and the registration was granted after treating them genuine. In the case cited above (1974) 95 ITR 454 (Mad) the case referred to by the Id. counsel, was also considered by their Lordships pointed out that the facts and circumstances of that case were quite different. The cumulative effect of all the facts narrated above is that the firm of the assessee is un-genuine. Hence, registration to the firm is hereby refused. It is further held that the business of the assessee firm actually belongs to M/s. Miri Mal Gian Chand. Hence, it is held a benami business of the allied concern of M/s. Miri Mal Gian Chand. The income of the firm M/s. Miri Mal Gian Chand. Service ex-copy of this order upon the assessee." 6. From the above, we notice that the basis of the ITO's order was that the two lady partners had not made any investment, neither they possessed any expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partner of MMGC even after passing order u/s 185(1)(b) of the Act in the firm's case on 2nd May, 1975, the revenue wanted to contend that it was not any individual partner who could be said to be a benamidar of any particular partner but the firm as such was a benami enity. From the ITO's letter dt. 6th Dec, 1974, it is clear that Gian Chand and Subbash Chand had certain tankers standing in their personal names which were their capital contribution to MMGC before its split up 1st April, 1972, In Gian Chand's name, tankers Nos. 2731 and 5461 valuing at Rs. 65,903 were taken as capital contribution by him in the firm and similarly a tanker in the name of Subhash Chand (6101) was also taken as capital contribution in the firm. Considering that the total income of both the firm and MMGC have been determined at Rs. 33,043 and that the lady partners got Rs. 2,000 odd each as profits shares, we are not prepared to go with the AAC on his assumed charge that a plan was devised to transfer income to be subjected to lesser rate of tax. As a matter of fact, if one has to go to the working of actual tax, more tax resulted from split up of the business because three common partners between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. In this connection, he referred us to the judgment in the case of P.A.C. Ratnaswamy Nadar Sons. vs. CIT (1962) 46 ITR 1148 (Mad). We do not want to go into this aspect of the case any further because the proposition is unexceptional. Sh. Singh also invited our attention to the Supreme Court judgment in the case of Ladhu Ram Taparia vs. CIT (1962) 44 ITR 521 (SC). 13. Sh. Singh next submitted that no specific reasons for split up of the business of MMGC carried on upto 1972-73 were available and there being no business expediency, the split up of business into two firms itself was bad and, therefore, the ITO's action in the present case is correct, we reject such contentions outright as frivolous because to split up a business it is not for the revenue to gauge business expendiency. It is well settled principle that it is open to the partners to carry on business in any manner they like. 14. The next argument of Sh. Singh was that since the contract of ESSO for transporting petroleum products continued to be in the name of MMGC, the firm could not be said to be engaged in valid business. Such argument is also rejected for the simple reason that when on principle sub par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine partnership set up on 1st April, 1972 with a given constitution and all the statutory requirements for claiming benefits of registration having been fulfilled, it should have been granted benefit of registration in terms of s. 185(1)(a) of the Act, which we direct. 18. On the view which we are taking in this case, the issue whether the firm was a benami set up of MMGC also stand decided against the revenue and in favour of the assessee. 19. We also like to observe that if we have not dealt with any particular line of the ITO's or the AAC's orders, it is not because these are not in our focus but the same have been considered as not affecting the issue before us. 20. While deciding this appeal, we are not holding that contribution or non contribution of capital by a partner, may be a lady partner or otherwise, is not essential but what we are deciding that such factor is itself, standing alone, cannot have the effect of deciding registration question and in a given circumstance non-contribution of capital may not be fatal. In this particular case, since it is not even the revenue's allegation that the two lady partners or any of the two and/or Kewas Krishan was a benami ..... X X X X Extracts X X X X X X X X Extracts X X X X
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