RAJAGOPALAN, J. -
(1.) THE two questions that were referred to us for our decision under Section 66(1) of the Indian Income-tax Act were
"(1) Whether there was any material for the Tribunal to bold that the business at Madurai did not belong to a partnership consisting of R. S. Balasubramania Mudaliar and Chidambaram and (2) Whether there was any material for the Tribunal to hold that the business at Chennimalai, Jaffna and Batticola did not belong to a partnership consisting of R. S. Balasubramania Mudaliar and Krishna Mudaliar."
(2.) THE assessee, Balasubramania Mudaliar, was carrying on business in cloth from the year 1936-37 in partnership with Mariappa Mudaliar. Balaubramania Mudaliar had a nine annas share, and Mariappa Mudaliar, a seven annas share. THE head office was at Chennimalai, and there were branches at Madurai, Coimbatore, Batticolla and Jaffna. THE claim of the assessee was that the partnership except for the head office at Chennimalai came to an end at the end of 1943-44. THE assessee further claimed that subsequent to 13th April, 1943, be entered into a partnership with Chidambaram for running a business at Madurai.
In the subsequent year Mariappa retired from the partnership at Chennimalai also, and Balasubramania claimed that he entered into a partnership for running the business at Chennimalai, Jaffna and Batticolla, with Krishna Mudaliar. The Income-tax Officer found that the two alleged partnerships were really fictitious, and that after Mariappa had retired from the business, the business at Chennimalai and also at all the branches constituted the proprietary concern of Balasubramania alone. This was confirmed on appeal by the Assistant Commissioner, and on further appeal, by the Appellate Tribunal. It was subsequent to that, that these questions were referred to us for decision under Section 66(1) of the ActBoth the questions really raised questions of fact and practically none of law. If the assessee, i.e., Balasubramania Mudaliar, could establish that there was no material at all on record for the taxing authorities or for the Appellate Tribunal to come to a conclusion that the partnership between Balasubramania and Chidambaram and the later partnership between Balasubramania and Krishna Mudaliar were fictitious, then, of course, the assessee could claim that those findings of fact, not supported by any evidence on record at all, should not prevail. During arguments before us learned counsel for the assessee could only urge that considering the entire evidence on record the points tabulated by the taxing authorities and by the Tribunal against the view, that the partnerships were real, should not be given any undue weight, and that taking all the evidence together it was more reasonable to hold that the partnerships were not fictitious but were real.
(3.) ON merely establishing that position, quite obviously the answer to the question, whether there was any material at all for the Tribunal to hold that the partnerships were fictitious could not be answered in the negative No doubt, the Tribunal found that Mariappa did leave the partnership after ill-feelings had developed between himself and Balasubramania. The Tribunal also found that the department conceded that Balasubramania Mudaliar had always done business in partnership with others. But there were also factors which the Tribunal considered, which militated against the truth of the two partnerships pleaded by the assessee. ONe of the points taken by the Tribunal was that with reference to the Rs. 3,000 alleged to have been contributed as his share of the capital by Chidambaram to the partnership between himself and Balasubramania, there was really no acceptable evidence that the Rs. 3,000 had been found or could have been found by Chidambaram. The assessee claimed that this Rs. 3,000 had been contributed by Chidambaram on the date of the partnership, 13th April, 1943. The explanation as to the source from which Chidambaram got Rs. 3,000 was that he got it from money lying to his credit in fixed deposit with Arunachalam Nidhi. That money was shown to have been drawn not on 13th April, 1943, but on 2nd July, 1943. The further explanation offered was that Chidambaram borrowed money in the first instance on 14th April, 1943, from one A. P. Swamy, and that after withdrawing the money from Arunachalam Nidhi, Chidambaram repaid A. P. Swamy. To support that claim, there was practically no evidence, and the taxing authorities and sub sequently the Tribunal refused to believe that portion of the assessee's story, that any money had been advanced in April, 1943, by A. P. Swamy. Yet another factor the Tribunal took into account was that while Chidambaram who was admittedly an employee before April, 1943, at Madurai drew a little over Rs. 300 a year as remuneration before April, 1943, he was credited with a sum of Rs. 9,024-4-2 on 12th April, 1944, and Rs. 4,666-10-1 on 12th April, 1945, as his one-third share of the profits of the business at Madurai. But though those sums stood to his credit his drawings were Rs. 835-14-9 in one year and Rs. 628-8-6 in the next year, sums which bear a closer relation to the remuneration paid prior to April, 1943, than to the sums with which he was credited in the account books as his share of the profits. Thus, the real position was that the authorities and the Tribunal were not satisfied that Chidambaram contributed any capital they were not satisfied that Chidambaram drew any portion of the profits qua profits. We are unable to hold that these were not materials which the Tribunal could take into account in deciding the question at issue, whether the alleged partnership between Balasubramania and Chidambaram was fictitious or was real. The mere fact that there was a deed of partnership and the fact that the account books consistently with the recitals in the partnership showed contributions of capital and allocation of profits may not be sufficient to establish the truth of that partnershipWe have to answer the first question in the affirmative and against the assessee;