Somnath Iyer, J. - (1.) THESE are applications under section 66(2) of the Indian Income-tax Act, 1922.
(2.) ON September 23, 1953, an application was presented by what purported to be a firm called Venkateswara District Motor Service providing transport facilities in Bellary for an order under section 26A of the Indian Income-tax Act, 1922. The order sought was the registration of the firm for the purposes of the Act. The assessment years in proceedings relating to which the application was disposed of by the Income-tax Officer were the years 1954-55, 1955-56 and 1956-57. By an order made by the Income-tax Officer on August 31, 1955, that application was rejected and an assessment was made on the hypothesis that the income alleged to be that of the firm was really the income of a proprietary concern owned by a certain Venkata Rao. From this order, there were appeals to the Appellate Assistant Commissioner of Income-tax, B Range, Bangalore, which were dismissed by an order made by him on July 31, 1958. There were further appeals to the Income-tax Appellate Tribunal, Hyderabad Bench, and those appeals were also dismissed on September 17, 1959. On January 28, 1960, the Tribunal refused to refer to this court these questions which the appellant required the Tribunal to refer under section 66(1) of the Act. So it is that the firm which sought registration under section 26A asks us in these civil petitions to require the Tribunal under section 66(2) to state a case and to refer those questions to this court for its opinion. The firm whose application for registration was refused will be referred to as the applicant in the course of this order. The undisputed facts are these : There was a transport business carried on in Bellary by a certain Venkata Rao which he commenced in the year 1924. Venkata Rao was a member of a Hindu joint family. In the year 1930, that business was being carried on by a company called Asquith and Co. Ltd., the shares of which were held by the members of that family. But, in the year 1939, that business became the separate business of Venkata Rao who continued to own it till the year 1953.
(3.) ON May 6, 1953, and instrument of partnership was executed between Venkata Rao and his cousins who were all members of a Hindu joint family. That document stated that those four persons had entered into a partnership which commenced on April 1, 1953, and that the business carried on by Venkata Rao had vested in the firm. The name of the firm was Venkateswara District Motor Service which was also the name of the in which Venkata Rao was carrying on business. The capital contributed by each partner was stated to Rs. 5,000 and their shares in profits and losses were equal. There was a stipulation that capital in excess of Rs. 5,000 contributed by any one of the partners should be treated as a loan to the firm which was liable to pay interest thereon at six per cent. a year. It was on the basis of this instrument of partnership that the application for registration under section 26A was made. The Income-tax Officer thought that the partnership was a mere make-believe designed to evade the provision of Income-tax Act and that Venkata Rao continued to be the exclusive owner of the business and of all its assets. The Appellate Assistant Commissioner by an order so carefully prepared that it evokes appreciation for its thoroughness and lucidity, concurred in the view taken by the Income-tax Officer. In the course of the very analytical marshalling of the facts he first stated what could be said to sustain the application and then enumerated the many reasons which according to him should defeat it. He ultimately reached the conclusion that there was a plan on the part of the persons who claimed to be the partners of the firm "to put up a bogus firm". He concluded with the following words : "In my opinion there is circumstantial evidence to hold that the business is the proprietary concern of one of the members only, namely, of Venkata Rao." ;