Desai, C.J:— This is a reference under section 66(1) of the Indian Income-tax Act, 1922, at the instance of the applicant, the Baroda City Ice Co. The relevant assessment year is 1953–54, the previous year being the year commencing from August 15, 1951, and ending with August 14, 1952.
2. The applicant firm claims to be a partnership firm constituted under a deed of partnership dated August 20, 1951. The applicant applied for the registration of the firm under the Indian Income-tax Act, 1922. The Income-tax Officer refused to register the firm.
3. The Appellate Assistant Commissioner in appeal directed that the firm be registered. The matter was carried further before the Appellate Tribunal. The Tribunal set aside the order of the Appellate Assistant Commissioner. The question that arises for our consideration is the following:
“Whether, on the facts and in the circumstances of the case, the Income-tax Officer was right in refusing to grant registration to the assessee under section 26A of the Income-tax Act?”
4. The point in dispute between the applicant and the respondent is whether a partnership has been constituted under the deed of partnership bearing date August 20, 1951. It is contended on behalf of the Commissioner of Income-tax that the arrangement represented by that deed is in reality a pooling arrangement. In order to decide the point it is necessary to examine the provisions of the deed of partnership. The parties to the deed of partnership as set out in the deed are the following:
“Uttamchand Watoomal Thanwani, Dayaldas Bhikchand Mulchandani, Dattaram Lalchand Keswani, and Bawa Amardas Gajrimal all of them being partners in the business carried on in the firm name and style of ‘Shri Ganesh Ice Factory’ of the First Part, Muljibhai Nathabhai Patel and Chandulal Chunilal Desai, both of them being partners in the business carried on in the firm name and style of ‘Minerva Ice and Refrigeration Company’ of Baroda of the Second Part, Ghanshyamdas Naroomal, one of the partners carrying on business in the firm name and style of ‘Messrs. Prem Ice Factory’ of Baroda of the Third Part, Kadarbhoy Mahomedally Sodagar, the son and administrator of the estate of the late Mahomedally Jafferji Sodagar, carrying on business in the firm name and style of ‘Sodagar Ice Factory’ at Baroda of the Fourth Part, Ambalal Shankarbhai patel, one of the partners carrying on business in the firm name and style of ‘Messrs. Patel Ice & Cold Storage’ of Baroda of the Fifth Part and Burjorji Hormasji, carrying on the business in the name of ‘Baroda Ice Factory’ at Baroda of the Sixth Part.”
5. In the deed of partnership it is recited that each of the aforesaid parties had been carrying on independent business at Baroda. It is further recited that the parties had agreed to carry on business in partnership at Baroda in the firm name and style of “The Baroda Ice Co. “on the terms and conditions therein appearing. Clauses 1, 5 and 9 of the deed of partnership provide as under:
“1. The partnership shall be that of sale of ice that will be manufactured by each of the parties hereto in their respective factories in Baroda.
5. The partnership shall purchase ice from each of the parties hereto in the first instance on credit and each of the parties hereto shall sell and supply whenever required to the partnership ice on credit at such price as may from time to time be fixed by the partnership with each of the parties hereto and shall sell in local and upcountry markets the ice so purchased at such price as may from time to time be fixed by the partnership and the partnership shall pay to each of the parties hereto such moneys as may from time to time be due and payable to each of them as and when the moneys on sale of their respective goods are recovered and received by the partnership.
9. The parties hereto have been carrying on independent business of their own of manufacture and sale of ice and each of the parties hereto shall be bound to sell ice manufactured by it, him or them only to the partnership and no one else and the partnership in its turn shall alone be entitled to effect sales thereof at such price as may from time to time be fixed by the partnership as aforesaid.”
6. There is a clause in the deed of partnership showing the shares of the partners in the profit and loss of the partnership. There are clauses which relate to the management of the affairs of the partnership. There is a further provision that none of the parties to the agreement would “extend or instal new ice plant or plants in the factory belonging to them either directly or indirectly with a view to increase the actual capacity of the ice plants by extension or installation of ammonia compressor engine or any driving power, brine tank, evaporating coils and condensers or otherwise. “It is further provided that none of the parties to the deed of partnership should get interested directly in any new firm, factory or concern in Baroda for manufacture and/or sale of ice. There is a provision for contribution of capital.
7. It is strenuously urged by the learned Advocate-General who appears for the Commissioner of Income-tax that this arrangement, though it appears in a document styled a deed of partnership, is in reality an arrangement whereunder the ice manufactured by the six factories mentioned in the deed is to be pooled together for the purpose of sale. Strong reliance has been placed on clause 1 referred to above. It is no doubt true that under clause 1 the partnership was to be for the sale of ice. The ice to be sold was the ice that was to be manufactured by the; parties thereto in their respective factories at Baroda. It is however provided in the said deed that the ice that was to be sold by the partnership was to be the ice that was to be purchased by the partnership from each of the parties to the said deed. Clause 9 in express terms says that each of the parties was bound to sell the ice manufactured by it only to the partnership and to no one else and that the sales thereof at such price as may from time to time be fixed by the partnership. This clause clearly indicates that the partnership was to purchase the ice manufactured by the patties therein mentioned and was to effect sales of the ice so purchased at such price as may be fixed by the partnership. Clause 5 provides that the partnership was td purchase ice from each of the parties thereto in the first instance on credit and that each of the parties to the agreement was to sell and supply, whenever required, to the partnership, ice on credit on such price as may from time to time be fixed by the partnership with each of the parties. Clause 5 also provides that the partnership was to sell in local and upcountry markets the ice so purchased at such price as may be fixed by the partnership. There is, however, a provision made in clause 5 to the effect that the partnership should pay to each of the parties thereto such moneys as may from time to time be due and payable to each of them as and when the moneys on sale of their respective goods were recovered and received by the partnership. Much has been made of this provision and it is urged that by reason thereof the effect of the provision relating to the purchase of ice by the partnership has been nullified and that there was to be in fact no purchase of any ice by the partnership from the parties mentioned in the deed. It is urged that the so-called price of the ice imported to be sold to the partnership was to be paid “as and when the moneys on the sale of their respective goods are recovered and received by the partnership”. It is urged that these words indicate that it was only when moneys Were recovered and realised in respect of the goods of the Various parties to the agreement that the partnership came under an obligation to pay the same. It is urged that there was no obligation on the partnership to pay for the ice supplied to the partnership and that reading the document as a whole the instrument provided merely for a pooling agreement. In our view it is not possible to accede to this suggestion. The words “as and when moneys on sale on their respective goods are recovered and received by the partnership” appearing in clause 5 do not render the earlier words relating to the purchase by the partnership of ice nugatory. The words in clause 5 are not “if and when” the moneys on sale of their respective goods are recovered and received by the partnership but “as and when” the moneys oh sale Of their respective goods are recovered and received by the partnership. The Words used merely indicate the point of time when the partnership was to pay for the price of goods which it had purchased on credit. Reading the document as a whole it seems to us clear that the intention of the parties was that the Baroda City Ice Co. was to purchase ice from the parties to the agreement and was to sell the ice at such price as the partnership might fix. Section 2(6B) of the Indian Income-tax Act, 1922, provides that the expression “partnership” is to have the same meaning as in the Indian Partnership Act, 1932. “Partnership” is defined in section 4 of the Indian Partnership Act, 1932, as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. In our view the test of partnership has been fully satisfied in the present case and the Baroda City Ice Co. has been constituted a partnership firm under the deed of partnership dated August 20, 1951, and is entitled to be registered as such. There are no other points urged before us.
8. The question as framed needs slight modification. We would reframe the question as follows:
“Whether, on the facts and in the circumstances of the case, the Baroda City Ice Co. was entitled to be registered as a firm under the provisions of section 26A of the Indian Income-tax Act?”
9. Our answer to the question is in the affirmative. The Commissioner will pay to the assessee the costs of the reference.
10. Question answered in the affirmative.