KRISHNA FLOUR MILLS Vs. COMMISSIONER OF INCOME TAX BANGALORE
LAWS(SC)-1960-11-36
SUPREME COURT OF INDIA (FROM: KARNATAKA)
Decided on November 01,1960

KRISHNA FLOUR MILLS Appellant
VERSUS
COMMISSIONER OF INCOME TAX,BANGALORE Respondents


Cited Judgements :-

MADHUSUDANA AND CO VS. COMMISSIONER OF INCOME TAX [LAWS(APH)-1971-2-20] [REFERRED TO]
KUMAR FINANCING CORPORATION VS. COMMISSIONER OF INCOME TAX CENTRAL [LAWS(CAL)-1979-2-11] [REFERRED TO]
EASTERN COMMERCIAL CORPORATION VS. COMMISSIONER OF INCOME-TAX [LAWS(P&H)-1975-3-14] [REFERRED TO]
GANGA MOTOR SERVICE VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1974-9-4] [REFERRED TO]
COMMISSIONER OF INCOME TAX VS. GOLCHA PROPERTIES PRIVATE LIMITED [LAWS(RAJ)-1979-11-32] [REFERRED TO]
SUBHASH MEDICAL STORES VS. COMMISSIONER OF INCOME TAX [LAWS(RAJ)-1984-2-34] [REFERRED TO]


JUDGEMENT

S.K. Das, J. - (1.)These are three appeals by special leave from the judgment and order of the High Court of Mysore dated October 8, 1958. By that order the High Court dismissed three petitions made by the Krishna Flour Mills, assessee before the income-tax authorities and appellant before us, under section 66 (2) of the Income Tax Act, 1922, holding that no question of law arose out of the order dated March 24, 1956, made by the Income-tax Appellate Tribunal, Madras, in Income-tax Appeals Nos. 2358, 2359 and 2360 of 1955-56.
(2.)M. Kasturi Ranga Setty (hereinafter referred to as K. R. Setty) was a member of a joint Hindu family. On a partition between himself and his two brothers, two flour mills belonging to the family became his separate property from June 1, 1948. These two flour mills were the Krishna Flour Mills and the Elgin Electric Flour Mills, in the latter of which K. R. Setty had only a lessees interest. He was assessed under the Mysore Income Tax Act as karta of a joint Hindu family until the assessment year 1949-50, that is, before the Income Tax Act, 1922, was brought into force in Mysore on and from April 1, 1950. Even before the disruption of the joint family Venkataramana Setty (hereinafter called V. Setty), brother-in-law of K. R. Setty, was managing the business of the two mills. He was paid a salary of about Rs. 6,000 per annum, which was increased in the account year 1948-49 to Rs. 10,000 per annum. This salary was credited in his name in the accounts of the mills. When a petition of the joint family was about to take place, K. R. Setty proposed to his brother-in-law that the latter should come in as a partner and on November 16, 1949, a partnership deed was executed, the partnership arrangement having been given effect to from July 1, 1949. This deed of partnership recited inter alia that the business of partnership would be confined to the working of the Krishna Flour Mills and the three partners were K. R. Setty, his wife, Nagaratnamma, and his brother-in-law, V. Setty. The partnership was originally for a period of five years which was later extended to March 31, 1955. Nagaratnamma contributed Rs. 50,000 as her share of the capital and V. Setty contributed Rs. 40,000; the sum of Rs. 50,000 came out of Nagaratnammas stridhanam money, which was credited to her account in the books of the Krishna Flour Mills and represented amounts given to her by her husband and the sum of Rs. 40,000 came out of the amounts standing to the credit of V. Setty in the books of the mills representing his accumulated past salary. The partnership deed further recited that the partners had equal shares in the profits and losses, and the business would be conducted by the first partner, namely, K. R. Setty, assisted by the third partner, namely, V. Setty. The firm was duly registered with the Registrar of Firms on November 23, 1949.
(3.)The appellant made an application under section 26A of the Act for registration of the firm for the assessment year 1950-51 and 1951-52. The Income-tax Officer, Bangalore, rejected the application on March 18, 1954, holding that the partnership was not genuine. That order was confirmed in appeal by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The appellant renewed his application for the assessment years 1952-53, 1953-54 and 1954-55. These applications were heard together, and by an order dated February 26, 1955, the applications were rejected. The appellant then preferred appeals to the Appellate Assistant Commissioner who by an order dated June 30, 1955, confirmed the order of the Income-tax Officer refusing registration under section 26A of the Act. The matter was then taken up to the Income-tax Appellate Tribunal in three appeals. The Tribunal also came to the finding that the firm was not genuine and dismissed the appeals. This was on March 24, 1956. The appellant then moved the Tribunal for a reference to the High Court under section 66 (1) of the Act. The Tribunal held that no question of law arose out of its order and dismissed the applications. Thereafter, the appellant moved the High Court under section 66 (2) of the Act for directing the Tribunal to state a case on the following question of law :
"Whether on the facts and in the circumstances of the case the decision of the Tribunal that the firm is not genuine and not registerable under section 26A of the Income Tax Act, is right in law -

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