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Case Number

Case Referred No. 39 of 1954

Attorney(S)

For the Appellant: The Advocate General for K. Srinivasan, K. Narayanaswami, Advocates.
For the Respondent: C.S. Rama Rao Sahib, Advocate.

Judges

Rajagopalan
Balakrishna Ayyar, JJ.

Acts

Section 66(2) of the Indian Income-tax Act, read with Section 21 of the Excess Profits Tax Act, the Income-tax
Indian Incometax Act in Sec. 2(6-B). Therefore the contention that Sec. 10(1)
Excess Profits Tax Act. Section 2(5) of that Act,
Section 2(5) of the Excess Profits Tax Act.11.
Section 2(5) of the Excess Profits Tax Act.2.
Section 10(2) of the Indian Income-tax Act
Section 2(5) of the Excess Profits Tax Act
provisions in the Excess Profits Tax Act
SECTION 4 PARTNERSHIP ACT
INDIAN INCOME TAX ACT
GENERAL CLAUSES ACT

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Smart Summary

Summary of Opinion delivered by Balakrishna Ayyar, J.

Factual and Procedural Background

Two brothers, Ramudu Iyer and Subbier, started Sri Kothandaram Weaving Mills in December 1934 and executed partnership deeds in 1938 and 1941. In January 1939 they jointly started Sri Kothandaram Spinning Mills, largely financed by the weaving mill, and executed a partnership deed for the spinning mill in March 1942. After the death of Ramudu Iyer in December 1943, the partnership continued between Subbier and S.R. Narasimhachari (son of Ramudu Iyer). Two fresh deeds of partnership were executed: one on 23 June 1944 for the weaving mill and another on 23 September 1944 for the spinning mill.

For certain income-tax and excess-profits-tax assessment years earlier the two mills had been treated variously as separate concerns and as one combined business: (a) in 1941–42 and 1942–43 the mills were held to be separate; (b) in 1943–44 the income of both mills was combined and assessed as one firm (upheld by the Appellate Assistant Commissioner); (c) subsequent assessments for 1944–45 and other excess-profits periods sometimes combined and sometimes separated the businesses. The Income-tax Appellate Tribunal initially held (4 Nov 1945 and 13 Dec 1946) that the mills should be separately assessed, but on a later reference reversed itself and held that the weaving and spinning mills were parts of the same business for purposes of Section 2(5) of the Excess Profits Tax Act. The Tribunal accordingly referred to this Court, under Section 66(2) read with Section 21 of the Excess Profits Tax Act, the specific question whether the two partnerships entered into in 1944 constitute one business carried on by the same person within the meaning of Section 2(5) of the Excess Profits Tax Act.

Legal Issues Presented

Whether, on the facts and circumstances of the case, the two partnerships entered into on 23-6-1944 and 23-9-1944 in respect of the weaving mills and the spinning mills respectively, constitute one business carried on by the same person within the meaning of Section 2(5) of the Excess Profits Tax Act?

Arguments of the Parties

Assessee (represented by the Advocate General)

Contended that although the partners named in the two 1944 deeds are the same individuals, the firm created by the 23 June 1944 deed (weaving mill) is different from the firm created by the 23 September 1944 deed (spinning mill).
Argued that under the Indian Income-tax Act a firm is an assessable entity and that concept should logically be carried into the Excess Profits Tax Act so that the two mills should be assessed separately.
Illustrated by example that the same persons can form distinct partnerships for different trades or different places (e.g., a rice trade in Tanjore and a cotton-seed trade in Coimbatore), which for Income-tax purposes would be distinct firms.
Relied on authorities such as Income-tax Commissioners v. Gibbs and referred to decisions (including Tribunal's earlier decisions) that treated the businesses as separate; suggested those earlier views merited respect.

Revenue / Department

The Department's position (as reflected in assessments and the Tribunal's later reasoning) was that the two businesses were carried on by the same persons and, under the second proviso to Section 2(5) of the Excess Profits Tax Act, all businesses carried on by the same person must be treated as one business for the purposes of that Act.
Excess profits tax officers and the Appellate Assistant Commissioner in certain assessments combined the profits of the two mills on the ground that both mills were carried on by the same two individuals (S.S. Subbier and S.R. Narasimhachari) representing their respective undivided families.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Income-tax Commissioners v. Gibbs (1942) 10 I.T.R (Sup) 121 (House of Lords)	Explains the meaning of "person" in tax statutes and shows that under the Income-tax Acts a partnership is treated as an assessable entity for taxation purposes; discusses treatment of partnership as an entry of assessment.	The Court cited Gibbs to show that the Income-tax Acts' vocabulary treats a firm as an assessable entity, but used the decision to contrast that position with the Excess Profits Tax Act, which lacks similar explicit provisions.
Watson & Everitt v. Blunden (1934) 18 Tax Cas 402	Authority cited in Gibbs for the proposition that for taxing purposes a partnership firm is treated as an entity distinct from the persons who constitute the firm.	Cited within the discussion of Gibbs to illustrate the Income-tax Act approach to the personification of partnerships; the Court relied on Gibbs (which cites Watson & Everitt) but distinguished the Income-tax Act context from the Excess Profits Tax Act.
Jesingbhai Ujamshi v. Commissioner of Income-Tax, Bombay — AIR 1930 Bom 198; reported 1950-18 I.T.R 23	Considered whether the same three persons carrying on businesses at two different places constituted one firm or two different firms for Income-tax purposes.	Referred as a case holding that two partnerships carried on by the same persons at different places constituted two different firms for Income-tax purposes; the Court noted that Jesingbhai Ujamshi held the opposite position to that required under the Excess Profits Tax Act, emphasizing the statutory distinction.
Vissonji Sons & Co. v. Commissioner of Income-tax, 1946-14 ITR 272 (Bom)	Statement that in law a firm has no existence independently of its partners, and if two firms consist of exactly the same partners the real position in law is that there is only one firm.	Quoted by the Court to support the proposition that where the association of persons is identical, the same association is the same "person" for purposes of the Excess Profits Tax Act.
Shantikumar Narottam Morarji v. Commissioner of Income-tax, 1955-27 I.T.R 69 : (S) AIR 1955 Bom 234	Considered whether certain sections of the Income-tax Act apply to an assessee who is a partner of a registered firm and discussed the legal status of a firm versus its partners.	The Court cited this decision (and passages therein) to show that although a firm is an assessable entity under the Income-tax Act, in law it is the partners who carry on the business; used to support reasoning about who carries on the business under the Excess Profits Tax Act.
Muthuraman Chettiar v. Commissioner of Income-tax, 1957-31 ITR 61 : AIR 1957 Mad 259	Followed the principle that partners, and not the firm as a separate legal entity, carry on the business for certain legal purposes.	Cited as a subsequent decision following Shantikumar Narottam Morarji to support the Court's view regarding the status of partners as the persons carrying on business.
R.C. No. 21 of 1951 (Division Bench decision of this Court)	Dealt with a remarkably similar factual situation where the same association of persons carried on businesses at two places under different names; addressed treatment under the Excess Profits Tax Act.	The Court relied on this Division Bench decision as binding and consistent with its conclusion that the same association of persons carrying on different businesses must be treated as one person for the purposes of the Excess Profits Tax Act; the Court refused to refer the matter to a Full Bench.
The Trustees, Nagore Durgah v. Commissioner of Income-tax, 1954-26 I.T.R 805 : AIR 1955 Mad 588	Discusses the application of res judicata principles to tax authorities and appellate proceedings.	Cited by the Court to reject the assessee's contention that the Tribunal ought to have respected the Tribunal's earlier contradictory views; the Court found the decision in Trustees, Nagore Durgah opposed to that contention.

Court's Reasoning and Analysis

The Court approached the referral by construing the proviso to Section 2(5) of the Excess Profits Tax Act, which provides that "all businesses to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act." The central question was the meaning of the word "person" in this proviso.

The Court observed that the definition of "person" in Section 2(17) of the Excess Profits Tax Act (which merely states that "person" includes a Hindu undivided family) was not sufficiently illuminating for the present purposes. Consequently, the Court referred to the General Clauses Act (Clause 42 of Section 3), which defines "'person' shall include any company or association or body of individuals, whether incorporated or not."

Applying that definition to the facts, the Court found that the association of persons owning the Kothandaram Weaving Mills is the same association of persons that owned the Kothandaram Spinning Mills — namely the undivided families represented by S.S. Subbier and S.R. Narasimhachari. Because those associations were identical, they constituted the same "person" within the meaning of the proviso to Section 2(5).

The Court addressed the assessee's contention based on the Income-tax Act principle that a firm is an assessable entity. It acknowledged that under the Income-tax Acts a firm is treated as an assessable entity (as explained in Income-tax Commissioners v. Gibbs and related authority), but emphasized that this status arises from explicit statutory provisions in the Income-tax Act. The Excess Profits Tax Act contains no corresponding provisions conferring separate assessable-entity status on partnerships. Therefore, the Court declined to import the Income-tax Act concept into the Excess Profits Tax Act.

The Court relied on precedents and authorities (including Vissonji Sons & Co. and a Division Bench decision in R.C. No. 21 of 1951) holding that where two firms consist of exactly the same partners or where the same association of persons carries on two businesses at different places or under different names, the same association is to be regarded as one "person" for relevant legal purposes. The Court treated those authorities as supporting the proper construction of "person" under the Excess Profits Tax Act.

Finally, the Court rejected the contention that the Tribunal should have adhered to its earlier contrary conclusions on the ground of principle analogous to res judicata, referring to Trustees, Nagore Durgah and noting that the rule of res judicata does not apply to the Income-tax Appellate Tribunal in the strict sense; the Court found the earlier reasoning on that point not persuasive to prevent the change of view.

Holding and Implications

Holding: The Court answered the referred question in the affirmative — that is, it held that the two partnerships entered into on 23-6-1944 and 23-9-1944 in respect of the weaving mills and the spinning mills do constitute one business carried on by the same person within the meaning of Section 2(5) of the Excess Profits Tax Act.

Consequences and practical effect:

The assessments under the Excess Profits Tax Act must treat the two businesses as one business carried on by the same person for the purposes of that Act.
The decision was rendered against the assessee and in favour of the Department; the Department was awarded its costs and counsel's fee of Rs. 250 as noted in the opinion.
The Court relied on existing statutory construction principles and prior decisions; it applied those authorities to the statutory language of the Excess Profits Tax Act rather than importing the assessable-entity concept from the Income-tax Act. The opinion does not purport to create a novel general rule beyond its application to the statute and facts before the Court.

Answer: In the affirmative. (Costs to the Department; counsel's fee Rs. 250.)

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S.S. Subbier v. Commissioner Of Excess Profits Tax

The Judgment of the Court was delivered by

Balakrishna Ayyar, J.:— Under Section 66(2) of the Indian Income-tax Act, read with Section 21 of the Excess Profits Tax Act, the Income-tax Appellate Tribunal has referred the following question for the decision of this Court:

“Whether, on the facts and circumstances of the case, the two partnerships entered into on 23-6-1944 and 23-9-1944 in respect of the weaving mills and the spinning mills, respectively, constitute one business carried on by the same person within the meaning of Section 2(5) of the Excess Profits Tax Act.”

2. The material facts are these: In December 1934 two brothers named Ramudu Iyer and Subbier started a weaving mill called Sri Kothandaram Weaving Mills. On 19th January, 1938 a deed of partnership relating to this mill and setting out among other things to the proportion in which the profits were to be shared was drawn up and executed by the partners. On 4th September, 1941, this deed of partnership was replaced by a fresh one. In January 1939 these two brothers jointly started a spinning mill called Sri Kothandaram Spinning Mills. Most of the money required for the erection of the spinning mills came from the Kothandaram Weaving Mills. In March 1942, a deed of partnership was executed in respect of the spinning mills. Ramudu Iyer died in December 1943. The partnership was continued between Subbier and Narasimhachari, son of Ramudu Iyer. Two fresh deeds of partnership were executed, one on 23rd June, 1944 in respect of the weaving mills and another on 23rd September, 1944 in respect of the spinning mills.

“In the income-tax assessments for 1941–1942 and 1942–1943 and the excess profits tax assessment for the chargeable accounting periods 6th September, 1940 to 12th April, 1941 and 13th April, 1941 to 12th April, 1942 the weaving mills and the spinning mills were held to be separate concerns though they were owned by the same persons, Ramudu Iyer and Subbier. In the course of the income-tax assessment for 1943–1944, the income of the two mills was treated as the income of one firm and a single assessment was made. This was upheld on appeal by the Appellate Assistant Commissioner.

3. The subsequent income-tax assessment for 1944–1945 and the excess profits tax assessments for the two chargeable accounting periods ending with 13th April, 1943 and 12th April, 1944 were also made on the combined results of the two businesses.” — Vide paragraphs 14 and 15 of the letter of reference by the Tribunal.

4. However, on 4th November, 1945, the Income-tax Appellate Tribunal held that the spinning-mills and the weaving mills should be separately assessed. The Tribunal recorded the view:

“We find the businesses are governed by the two different deeds and the terms in each of them are different from the other. Thus, we find the very terms of the partnership do indicate that the businesses are separate.”

5. The Appellate Assistant Commissioner applied that decision to the Income-tax assessment for the assessment year 1944–1945 and to the excess profits tax assessment for the chargeable accounting periods ended 13th April, 1943 and 12th April, 1944.

6. The appeal which the Department took to the Appellate Tribunal was dismissed on 13th December, 1946. In dealing with the excess profits tax assessments, the Tribunal wrote:

“The question, therefore, before us is to determine whether the two businesses (i.e) Kothandaram Weaving Mills and Kothandaram Spinning Mills are being carried on by the same person. Looking at the partnership deed, it is clear to us that the partnership is of one firm between two partners individually whereas the other partnership is between two partners as representatives of their respective Hindu undivided families. In other words, so far as Kothandaram Spinning Mills are concerned, it is a partnership entered into between the two Hindu undivided families through their kartas. It cannot, therefore, be said that they are carried on by the same persons. We are, therefore, not prepared to accede to the argument of the authorised representative of the department.”

7. For the chargeable accounting perids ended 12th April, 1945 and 31st March, 1946 the excess profits tax officer amalgamated the income of the two mills. He observed:

“For excess profits tax, the unit of assessment is the business and not the person ……..In this case, there is no doubt that both the Sri Kothandaram Spinning Mill and the Sri Kothandaram Weaving Mill are carried on by the two persons. Messrs S.R Narasimhachari and S.S Subbier jointly. Hence, whatever may be the position for income-tax, as regards the excess profits tax assessment is concerned, under the second proviso to Section 2(5) of the Excess Profits Tax Act, the two businesses have to be treated as one business for assessment.

8. As the facts, however, show that both in the Kothandaram Spinning Mills and in the Kothandaram Weaving Mills the partners were the same, viz., the undivided families, represented by the two individuals, S.S Subbier and S.R Narasimhachari, I am making this assessment jointly on the two partners combining the profits of the two businesses.”

9. The Appellate Assistant Commissioner confirmed this decision.

10. On appeal the Tribunal, reversing the conclusion it had reached on 4th November, 1945 and 13th December, 1946, held,

“that the weaving and spinning mills were parts of the same business carried on by the two partners Subbier and Narasimhachariar for purposes of Section 2(5) of the Excess Profits Tax Act.”

11. The assessees then came to this court and, in accordance with the directions issued to it, the Tribunal has referred the question quoted above for the determination of the court.

12. It is not controverted that the partners who were parties to the deed dated 23rd June, 1944 and to the deed dated 23rd September, 1944 are in both cases the very same persons. The learned Advocate General who appeared for the assessee contended that notwithstanding this fact, the firm created by the partnership deed of 23rd June, 1944 is different from the firm created by the partnership deed of 23rd September, 1944. He pointed out that though a firm is not a juristic person for all purposes it is an assessable entity under the Indian Income-tax Act.

13. Two persons may enter into a partnership to trade, say in rice in Tanjore. The very same persons may enter into another partnership to trade in cotton seed in Coimbatore. For the purpose of the Indian Income-tax Act the firm in Tanjore would be one entity and the firm in Coimbatore would be another entity. The two would be wholly distinct. It would be only logical and proper to carry this concept into the Excess Profits Tax Act also, and, if we do that, it will have to be held that the Kothandaram Weaving Mills and the Kothandaram Spinning Mills have each to be assessed separately.

14. In the course of his arguments the learned Advocate General referred to Income-tax Commissioners v. Gibbs, 1942-10 I.T.R (Sup) 121. The material facts in that case are set out in the second paragraph of the speech of Lord Chancellor:

“The firm of Sri R.W Carden and Co, at the time when the assessment was made, consisted of four partners who for the present purpose may be designated A, B, C and D, and this continued to be the composition of the firm on January 1, 1938, when the first half of the income-tax resulting from the assessment became due. On February 7, 1938, however, the composition of the firm changed, owing to the taking in of a fifth partner, who may be called E. On July 27, 1938, the Inspector of Taxes, purporting to act in accordance with rule 9(1) of the Cases I and II of Schedule D, certified to the general commissioners particulars of the change which had taken place and the commissioners thereupon purported to adjust the assessment by charging to the firm of five persons, out of the total assessment of £ 69355, the apportioned amount of £ 11078, with the result that the firm of four persons would be relieved of liability for tax on this latter figure, but would be left answerable for tax on the balance of £ 58,277.”

15. The point for determination is set out in paragraph 3 of his speech:

“But though the apportionment is correctly worked out, the respondents have throughout insisted that no such apportionment under Rule 9 could lawfully be made, since, according to them, the change during the year of assessment in the composition of the firm does not constitute a cesser in carrying on the trade by A, B, C and D, and the succession “by another person”, namely, A, B, C, and E in that trade. It is as to the validity of this contention, and as to the proper construction and application of Rule 9, that the House has now to pronounce.”

16. The Court of Appeal held that there had been no cesser in the carrying on of the trade by A.B.C and D. In the Court of Appeal Clauson L.J had reasoned,

“that it is not a partnership firm which carries on trade, but its individual members who carry it on in partnership, and that the old partnership is not to be regarded as ceasing to carry on trade, and the new partnership is not to be regarded as succeeding, when members of the old partnership are also some of the members of the new and thus do not individually cease to carry on the trade at all.”

17. This decision was reversed by the House of Lords. On pages 136 and 137, Lord Macmillan stated as follows:

“The important thing to ascertain is the meaning of the word ‘person’ in the vocabulary of the Incometax Acts. The word constantly occurs throughout the Acts, and I think that it is most generally used to denote what may be termed an entry of assessment, that is, the possessor or recipient of an income which the Acts require to be separately assessed for tax purposes. Rule 10 provides that “where a trade or profession is carried on by two or more persons jointly the tax in respect thereof shall be computed and stated jointly and tn one sum, and shall be separate and distinct from any other tax chargeable on those persons or any of them and a joint assessment shall be made in the partnership name.” The profits of a business carried on by a partnership are thus treated as a separate subject of assessment and the assessment is made in the partnership name. The personification of partnerships, is even more manifest in rule 12, by which in certain circumstances a “partnership shall be deemed to reside outside the United Kingdom notwithstanding that some of the members of the said partnership are resident in the United Kingdom.” That rule used the expression ‘the trade or business of a partnership firm’, ‘the said firm shall be chargeable’, ‘an assessment may be made on the said firm in respect of the said profits in the name of any partner resident in the United Kingdom.’ Justification is thus not wanting for the view expressed by Romer L.J that for taxing purposes “a partnership firm is treated as an entity distinct from the persons who constitute the firm.” Watson & Everitt v. Blunden, (1934) 18 Tax Cas 402 at p. 409. Haying regard to the special vocabulary of the incometax legislation, I find no difficulty in interpreting the words ‘a person charged’ in rule 9 to include the case of several persons associated together in partnership for the purpose of carrying on a trade in common whose profits are by the Acts made the subject of separate assessment and separate charge.”

18. Reference was also made to Jesingbhai Ujamshi…Applicant; v. The Commissioner Of Income-Tax, Bombay….*, 1950-18 I.T.R 23 : (AIR 1930 Bom 198). That was a case in which three persons carried on a business in partnership in Ahmedabad in insurance, brokerage, cotton etc. The very same persons carried on another business in Bhavanagar, and, the question was,

“whether these two partnerships constitute two different firms or whether the three partners carry on the same firm and the same business at Ahmedabad and Bhavanagar.”

19. The Court held that they formed two different firms.

20. The instant case however is not one under the Indian Income-tax Act but under the Excess Profits Tax Act. Section 2(5) of that Act, so far as is material, runs as follows:

“‘business’ includes any trade, commerce or manufacture .. .. … ..

Provided further that all businesses to which this Act applies carried on by the same person shall be treated as one business for the purposes of this Act.” The question therefore is what does the word “person” in this proviso mean? The definition in Sec. 2(17) of “person” is not helpful since all it says is that “person” includes a Hindu undivided family.”

21. We have therefore to fall back on the General Clauses Act to find out what the word “person” means. Clause 42 of Sec. 3 of that Act gives this definition:

“‘person’ shall include any company or association or body of individuals, whether incorporated or not.”

22. The association of persons who owned the Kothandaram Weaving Mills is the same association of persons who owned the Kothandaram Spinning Mills. Both are therefore the same “person.” It is well-established that while a corporation is one artificial whole

“with partnerships the case is otherwise; the members of these do not form a collective whole, distinct from the individuals composing it; nor are they collectively endowed with any capacity of acquiring rights or incurring obligations. The rights and liabilities of a partnership are the rights and liabilities of the partners and are enforceable by and against them undividually.” See pages 23 and 24 of the eleventh edition of Lindley on Partnership.

23. In Vissonji Sons and Co. v. Commissioner of Income-tax, 1946-14 ITR 272 (Bom), it was observed:

“In law a firm has no existence independently of its partners, and if there are two firms consisting of exactly the same partners, the real position in law is that there is only one firm. It may carry on separate businesses, and may carry on those businesses in different names but in fact there is only one firm in law.”

24. We must, however, mention that this statement of the law was commented on as obiter in 1950-18 I.T.R 23 : (AIR 1950 Bom 198).

25. In the case reported in Shantikumar Narottam Morarji v. Commissioner of Income-tax, 1955-27 I.T.R 69: ((S) AIR 1955 Bom 234), the assessee claimed deduction under Section 10(2) of the Indian Income-tax Act and the question that the court had to consider was whether Sec. 10 had any application to the case of an assessee who is a partner of a registered firm. The contention of the department and the decision of the court in respect of that contention will appear from the following passage:

“Mr. Joshi's contention is that Sec. 10 has no application at all because Sec. 10 deals with the profits of a business carried on by the assessee and according to Mr. Joshi the business in this case is not carried on by the assessee but is carried on by the assessee along with a partner or partners. Mr. Joshi says that a firm under the Indian Income-tax Act is an assessable entity and therefore a distinction must be made between a business carried on by a firm and a business carried on by an individual. Althugh a firm is an assessable entity under the Indian Income-tax Act a firm is not a legal entity. In the eye of the law a firm is a compendious expression used to indicate that several persons constituting that firm are carrying on a business. But that compendious expression cannot give to the firm a legal entity or a legal existence. In law it is only the partners who exist and who carry on the business. It is equally true that looking to the definition of “partnership” in Section 4 of the Partnership Act, when you have a partnership business, the business is carried on by each of the partners, and the definition of a partnership in the Partnership Act has been incorporated in the Indian Incometax Act in Sec. 2(6-B). Therefore the contention that Sec. 10(1) cannot apply to a partner in a registered firm is untenable because he does carry on the business although that business happens to be a partnership business, and therefore if any profits and gains are derived by the assessee from the business carried on by him, those profits and gains must be brought to tax only under this head, viz., the head falling under Sec. 10(1) which is the head of business.”

26. That decision was followed by a Bench of this Court in Muthuraman Chettiar v. Commissioner of Income-tax, 1957-31 ITR 61 : (AIR 1957 Mad 259).

27. From all this it is reasonable to conclude that though a business is earned on in the name of a firm, the persons carrying on the business are the partners themselves and not the firm. The persons carrying on the business within the meaning of the second proviso to Section 2(5) of the Excess Profits Tax Act would in this view and in the present case be Subbier and Narasimhachari. No doubt under the Indian Income-tax Act a firm is an assessable entity, but, it acquires that status by virtue of the explicit provisions contained in that Act, and there are no provisions in the Excess Profits Tax Act justifying the carrying forward of this concept into the latter Act.

28. The very same question which the learned Advocate General raised before us has been dealt with in R.C No. 21 of 1951. The facts there were remarkably similar. The members of a Hindu family, six in number, effected a division in status in 1936. A deed of partnership was drawn up in October 1938. Thereafter the same members carried on business at two different places under two different names. One business was in Nandyal and the other was in Hindupur. Both the firms were registered under Section 26-A of the Incometax Act and so far as the incometax was concerned, they were assessed separately.

29. But for purposes of the Excess Profits Tax Act the profits of the two businesses were combined and assessed as a whole. The assessee contended that this was not correct as the two firms were different legal persons and the business must be treated as having been owned by two different entities. This contention was negatived by the department and also by the Appellate Tribunal. On a reference made to this court it confirmed the views of the department and the Tribunal. The Court observed,

“The same association of persons commenced two businesses one at Nandyal and the other at Hindupur. In other words, the ownership of the two businesses is vested in the same association of persons …. There is only one combination of persons that carried on business both at Nandyal and Hindupur …. So long as the partnership is not a legal entity and has no corporate existence in the eye of the law, it is impossible to treat the same association of persons as two different legal entities, merely because they were carrying on businesses at two different places under different styles and names.”

30. The Court further explained how the position under the Indian Income-tax Act was different.

31. The learned Advocate General did not dispute that this decision being that of a Division Bench of this court is binding on us. But, he suggested that the matter required re-consideration. We are, however, of the opinion that this decision lays down the law correctly. We see no justification for referring the matter to a Full Bench.

32. It was next pointed out on behalf of the assessee that in November 1945, and again in December 1946, the Tribunal took the view that the businesses were not carried on by the same persons and that it was not justified in reversing its view in respect of another year. No doubt it was not contended that the rule of res judicata applies to the Incometax Appellate Tribunal, but, it was suggested that the principles of res judicata should have been respected.

33. So far as this argument is concerned, it is sufficient to refer to the decision in The Trustees, Nagore Durgah v. Commissioner of Income-tax, 1954-26 I.T.R 805 : (AIR 1955 Mad 588). At pages 814 to 816 (of ITR): (at pp. 590 to 591 of AIR) the question is discussed at length and reference is made to the relevant English and Indian decisions. That decision is against the contention of the assessee. In the result, we would answer the question referred to us in the affirmative and against the assessee. The Department will get its costs. Counsel's fee Rs. 250.

D.H.Z

34. Answer in the affirmative.

S.S. Subbier v. Commissioner Of Excess Profits Tax

Summary of Opinion delivered by Balakrishna Ayyar, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Assessee (represented by the Advocate General)

Revenue / Department

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

S.S. Subbier v. Commissioner Of Excess Profits Tax

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