COMMISSIONER OF INCOME TAX Vs. PALLIVEEDU TRADERS

JUDGEMENT

(1.) IN pursuance of the direction of this court in Original Petition No. 714 of 1982, at the instance of the Revenue, the following two questions were referred to this court under Section 256(2) of the INcome-tax Act, 1961, for a decision thereon :

(2.) HEARD counsel on both sides.

(3.) THE definition of partnership in Section 4 of the Indian Partnership Act contains three elements, viz., (i) there must be an agreement entered into by all the partners concerned, (ii) the agreement must be to share the profits of the business and (iii) the business must be carried on by all or any of the partners concerned acting for all. THE third element is absent in the present case since the business was not carried on by all the partners, partners 3 and 4 having stated that they have no business or any interest in any business. It may be contended that partners 3 and 4 are sleeping partners but even then the business must be one carried on by the others acting for the sleeping partners also. Since Smt. Kadishabi and Smt. Ayishabi have nothing to do with the business as stated by them, a partnership as defined in Section 4 of the Act is not constituted.