SULAIMAN - (1.) -
(2.) THE question referred to the High Court by the Commissioner is in the following words : Whether having regard to the deed of partnership, dated 16th April, 1928, and to other relevant evidence on the record the finding that the registered firm Jai Dayal Madan Gopal of Benares is in its corporate capacity a partner in nine other firms bearing the same name was a legal and proper finding ? It is obvious that the Commissioner has assumed that a registered firm can under the law be a partner in another firm in its corporate capacity, and he has asked to answer the question whether having regard to the deed to the partnership and to other relevant evidence on the record, the firm Jai Dayal Madan Gopal of Benares is a partner in the other firms. Strictly speaking the question of law that one firm cannot legally be a partner in another firm in its corporate capacity has not been referred to us. This would be clear if we see the grounds in the petition of the assessee for reference to the High Court. The first three grounds did not refer to this question at all. The fourth ground was confined to the proper construction of the instrument of partnership, and the fifth ground was whether the income from the various partnership concerns mentioned in the assessment order referred to in the appellate order is the exclusive income of the applicant firm or the individual income of the partners of the applicant firm under the instrument of partnership read with the proviso to Section 55 of the Act ? The question of the impossibility of one firm being a partner in another firm was not asked to be referred to. It is, however, clear from the way in thick the question has been put by the Commissioner, challenging, as it does, the legality and propriety of the Income Tax Officer it may well be said to include the question of law as stated above. We have power to reform the question so as to answer it correctly. But when re-forming it we must take care that we do not answer the new question in a way which would lead the income-tax department to imply an answer to another question not directly included. The real matter with which the department is concerned is whether the income received by the Benares firm from the various partnership concerns in other places is a part of the taxable income of the Benares firm or not. It is in a proceeding relating to the assessment of tax on the income of the Benares firm that the question whether the Benares firm car legally be a partner in the other firm arises. The instrument of the partnership begins as follows :- Whereas a partnership firm in the name of the head of our family Seth Jai Madan Gopal is carried on at Kashi (Benares) and other places, in which we are shareholders of half and half, etc.
(3.) IF the question had turned entirely on an interpretation of the instrument of the partnership I would have said that it means that there is one partnership firm in the name of Seth Jai Dayal Madan Gopal carrying on business at Kashi (Beneres) and other places in which the two persons are partners to the extent of a half-share each. IF an answer were sought as to whether the Benares firm was a partner in the other firms on the basis of the deed of the partnership and other relevant evidence on record, I would decline to answer the question because that is not a question of law at all but one of fact. Where the evidence is both oral and documentary in addition to the deed of partnership I would not say that the matter is merely one of legal inference from found facts, but I would say that it is a question of fact itself. But if a question was asked whether one form can legally be partner in another firm, then I would unhesitatingly proceed to answer it. There is authority for the view that one firm cannot legally be a partner in another firm. Section 239, Contract Act, defines a partnership as the relation which subsists between persons who have agreed to combine their property, labour or skill in some business, and the share the profits thereof between them. The view has been expressed that the word person in this section does not include a firm. I may refer to the case of Sheodayal Khemka v. Joharmull Manmull [50 Cal. at p. 558] where Page, J., remarked that a firm is not a person; it is not in entity but is merely a collective name for the individuals who are members of the partnership. This case was followed by a Division Bench of the Calcutta High Court in Brojo Lal Saha v. Badh Nath Pyare Lal Co., where it was held that a partnership entered into by two or more persons is not a legal person and that a firm is not a person within the meaning of Section 239, Contract Act. A Bench of our own High Court in Basanti Bibi v. Babu Lal Poddar expressed a similar view that the owning of a five annas share in the factory could not be regarded as forming a separate partnership, but that there was only one partnership owning the whole factory. The facts of the last mentioned case were, however, peculiar.;