MULK C V Vs. COMMISSIONER OF AGRICULTURAL INCOME TAX

JUDGEMENT

(1.) THESE references are under Section 60 of the Agrl. I.T. Act, made by the Kerala Agricultural Income-tax Appellate Tribunal, Additional Bench, Kozhikode, at the instance of the assessee. The assessment years are 1969-70 and 1970-71. For the earlier year the assessee filed a return of agricultural income declaring his share at Rs. 1,611 from Messrs. Koravampady Estate. For the year 1970-71 he declared his share of the loss from the same estate at Rs. 1,685 46. During both the years in question, he was the managing partner of the estate, entitled to draw a salary of Rs. 6,000 per annum for his services as the managing partner of the firm, besides his share of the income under agreements dated 26th July, 1966, and 10th February, 1970. Clause 6 of the earlier agreement and Clause 7 of the later one provided for the payment of remuneration to the managing partner. The returns were rejected by the Agrl. ITO. In assessing to tax, the assessing officer took into account the salary received by the assessee as the managing partner of the firm, as the assessee's agricultural income. On appeal by the assessee, the AAC, relying on the decision of this court in S.A. Ramaraj v. Commr. of Agrl. I.T. [1969] 71 ITR 108 (Ker) and directed the Agrl. ITO to exclude the amount of salary received by the assessee as managing partner of the estate from his net agricultural income. From the orders of the appellate authority, the State preferred a further appeal, and the Tribunal allowed the appeal and held that the remuneration paid to the managing partner was not liable to be excluded in assessing the assessee's agricultural income. At the instance of the assessee the following questions of law have been formulated and referred to this court for our determination and opinion ;

(2.) THE decision relied upon by the Tribunal in support of its conclusion is R.M. Chidambaram Pillai v. CIT [1970] 77 ITR 494, a Full Bench decision of the Madras High Court, rendered in relation to the Indian I.T. Act, 1922. Two sections therein are material : one is Section 10(4)(b), which corresponds to Section 40(b) of the Act of 1961 and the other is Section 16(1)(b) corresponding to Section 67(1) and (4) of the Act of 1961. THEre was a prior decision of the Madras High Court in Mathew Abraham v. CIT [1964] 51 ITR 467. Referring to the decision, the Full Bench said (p. 496) :

(3.) AT pages 297 & 298 the court examined the position that a firm is not a person in law. This was stressed with reference to Section 3 of the Partnership Act and the statement of principle in Lindley on Partnership, and again, on examination of the provisions of the Indian law of partnership. In the light of the above, the conclusion was stated thus (p. 299) :