YOUNG INDIA MINING AND TRANSPORT CO Vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF DELHI
YOUNG INDIA MINING And TRANSPORT CO.
COMMISSIONER OF INCOME TAX
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(1.)A common question of law has been formulated in these three references under S. 256(1) of the IT Act, 1961 (hereinafter referred to as "the Act"), for the opinion of the Court. The question is :
"Whether, on the facts and in the circumstances of the case found by the Tribunal, there was material to come to the conclusion that the partnership constituted by the partnership deed dt. 1st Oct., 1958, was not genuine ?"
(2.)THE assessee is Young India Mining and Transport Co., Kashmere Gate, Delhi. The assessment years are 1960 -61, 1961 -62 and l962 - 63. There was a firm styled C. Didwania and Co. consisting
of Shri C. Didwania and his sons, Shri D. R. Didwania and Shri G. L. Didwania. This partnership was
entitled to exploit certain iron mines known as Tonda Iron Mines. That firm entrusted the work of
extraction of iron ore from these mines to G. Didwania, a proprietary concern of Shri G. L.
Didwania, under the terms of a letter dt. June l, 1957. On October I, 1958, a deed of partnership
was entered into between Shri Shiv Shankar Aggarwal and Shri Bhagirath Bhushan on the terms
and conditions mentioned therein. The partnership business was to be that of mining and transport
or such other type as may be mutually agreed upon and was to be carried on under the name and
style of Young India Mining and Transport Co. These two partners admitted four minor children of
Shri G. L. Didwania to the benefits of partnership w.e.f. 1st Oct., 1958. The share of profits and
losses of the partnership was specified. Shri Shiv Shankar Aggarwal and Shri Bhagirath Bhushan
were to get 4per cent each and the four minor children admitted to the benefits of partnership
were to get 23per cent each. The losses, however, were to be borne by Shri Shiv Shankar
Aggarwal and Shri Bhagirath Bhushan equally, i e., 50per cent each. The firm entered into an
agreement with C. Didwania, the mine owners, on March 28, 1959, whereby it agreed to raise the
ore, in the mines from 1st April, 1959. The earlier contract in favour of G. Didwania was cancelled
w.e.f. April I, 1959.
Young India Mining and Transport Co. applied for registration under the Partnership Act and was granted a certificate of registration on February 20, 1959. The firm applied for registration under
the Act for the asst. yrs. 1960 -61 and 1961 -62 and was granted registration. The ITO who took up
the assessment proceedings of the assessee for the asst. year 1962 -63, however, expressed the
opinion that no genuine partnership had come into existence on 1st Oct., 1958, as claimed by the
assessee. He came to this conclusion for the reasons recorded by him in his order passed under s.
186(1) of the Act for the asst. yrs. 1960 -61 and 1961 -62, dt. March 20, 1967. He also refused registration to the assessee for the asst. year 1962 -63. Before taking the action, the ITO had issued
a show -cause notice to the assessee as to why the partnership should not be held to be non -
genuine. The statement of Shri Shankar Aggarwal was recorded by the ITO in those proceedings.
The assessee preferred appeals to the AAC. The AAC agreed with the finding recorded by the ITO
and came to the conclusion that the partnership was not genuine. On further appeal to the
Tribunal, the Tribunal agreed with the finding recorded by the ITO as well as the AAC, but recorded
its own conclusions on facts. The Tribunal, therefore, confirmed the order of the ITO and the AAC
in refusing registration to the assessee.
(3.)THE Tribunal declined the application of the assessee under S. 256 for making a reference of the question of law. The assessee came to this Court in Income -tax Case No. 29/70. This Court
directed the Tribunal to draw up a statement of case and refer for the decision of the Court the
question of law.
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