Decided on March 26,1954



- (1.)THIS reference arises on a misapprehension on the part of the Tribunal as to the law that we laid down in the case of Jeshinghbhai Ujamshi v. Commissioner of Income-tax. We were considering the case of the same assessee and it appeared that the assessee had two firms one at Bhavnagar which he had started in 1918 and the other in Ahmedabad which he had started in 1934, and the question that arose was whether when there are common partners in two firms they can in the eye of the income-tax law constitute two separate firms. The view take by the Tribunal was that if the partners are common there can only be one firm, and in coming to that conclusion they applied the principle of ordinary civil law. We differed from that view and we pointed out that a firm was a taxable unit under the Income-tax Act, and for the purpose of the Income-tax Act a firm was an entity which it was not under the ordinary civil law, and therefore we sent back the case to the Tribunal in order to determine whether the two firms carried on the same business or separate businesses, and we emphasized the fact that the question whether the business was one or separate was a question of fact which could only be determined by the Tribunal after taking into consideration all the relevant materials. This matter having gone back to the Tribunal the Tribunal has considered all the materials and has come to the conclusion that the two firms at Bhavnagar and at Ahmedabad constitute only one business.
(2.)NOW, if this was a finding of fact arrived at pursuant to out directions, then finding would be binding upon us, but the finding has been arrived at, not on the appreciation of evidence or on a consideration of materials placed before, it but it has come to the conclusion, as already indicated, with respect to the Tribunal, on a complete misapprehension as to the law laid down in the decision just referred to. The view taken by the Tribunal is that no question of there being two businesses can arise if the owner of the two businesses is the same. Now, that was the very question that arose before us and on that question we disagreed with the Tribunal. We held that even if the owners are the same, even so, there can be two separate firms for the purposes of the Income-tax Act if the businesses carried on by the firms were different, and what we wanted the Tribunal to determine was whether the businesses were the same or different. The only ground on which the Tribunal has come to the Conclusion that in this case the businesses are not different is that the owners of the two firms are the same and therefore in law they constitute one firm and not two firms. This is entirely contrary to the decision given by us. What is even more significant is what it accepts the position that there is not interlacing or interlocking between the Ahmedabad firm and the Bhavnagar firm. That is the correct test in order to determine whether the two businesses are the same or different. It applied the test, and having applied the test it came to the conclusion favourable to the assessee. Having therefore held that there is no interlacing or interlocking it should have come to the conclusion that the two businesses were the same, but it did not come to this conclusion merely because the owners of the two firms were the same. It took the view that under these circumstances it is not possible for the two firms to be separate firms but they must be one firm.
(3.)WE must, therefore, again differ from the view taken by the Tribunal and we must answer the questions submitted to us : (1) In the negative. (2) In the negative. (3) In the affirmative.

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