- (1.) This appeal by special leave is directed against the order of the High Court of Madras in a reference made to it by the Income-tax Appellate Tribunal under S. 66(2) of the Indian Income-tax Act, 1922, hereinafter called the Act.
(2.) The facts that have given rise to the appeal may briefly be stated. There are 5 firms in Sivakasi manufacturing matches under the name and style of Shenbagam Match Works, Brilliant Match Works, Manoranjitha Match Works, Pioneer Match Works and Gnanam Match Works. The total number of the partners of all the 5 firms does not exceed 10 or 11 in number. Rajamoney Nadar is the sole proprietor of Shenbagam Match Works and in the other 4 firms there are more than one partner. In the year 1948 a person from each of those firms in his representative capacity formed a partnership to carry on the business of banking and commission agents, the principal business being the marketing of the products of the different match factories in Sivakasi. When the said partnership applied for registration for the assessment year 1949-50, it was refused by the Income-tax Department on the ground that different firms could not constitute a valid partnership. Thereafter, Sankarlinga Nadar, Arumughaswami Nadar, Arunachala Nadar, Palaniswami Nadar and Rajamony Nadar, the first four being one of the partners of their respective firms and the last being the sole proprietor of his firm, in their individual capacity entered into a partnership for the aforesaid purpose and executed a partnership deed dated. April 1, 1950. They presented the said deed of partnership to the Income-tax Officer for registration. The Income-tax Officer by his order dated October 27, 1952, registered the same under S. 26-A of the Act; but the Commissioner of Income-tax, acting under S. 33-B of the Act, cancelled the registration by an order dated October 23, 1954, and directed the assessment to take place as that of an unregistered firm. On appeal, the Income-tax appellate Tribunal held, on a construction of the partnership deed and also on the basis of some other circumstances, that the said deed "is not genuine and brought into existence only as a simulate arrangement, that the profits which are distributed under the deed to the individuals mentioned there in are not the true profits of those individuals." In short it held that the said partnership deed was not a genuine one. On a reference made to the High Court of Judicature at Madras, a Division Bench of the High Court, on a construction of the document, came to the conclusion that the Match Works were not the real parties to the partnership but the parties of the document were the real partners. Hence the present appeal.
(3.) Learned counsel for the Revenue raises before us the following two points, namely. (i) the finding of the Appellate Tribunal was one of fact and that the High Court had no jurisdiction to canvass the correctness of its finding on a reference made under S. 66 (2) of the Act, and (ii) the conclusion arrived at by the Tribunal was the correct one and the High Court erroneously interfered with it.;