COMMISSIONER OF INCOME TAX Vs. MENON M S

JUDGEMENT

(1.) SINCE all these tax cases practically relate to the same subject-matter between the same parties they are being dealt with together. The facts and circumstances leading to all the above cases may briefly be noted. Pattu Padmanabhaiah Chetty & Sons owned a theatre called "Shri Padmanabha Theatre", until January 18, 1968. The said firm was dissolved with effect from January 18, 1968, by an order of the High Court in C. S. No. 6 of 1968 dated February 3, 1972. The said suit was one for dissolution of the partnership. During the pendency of that suit at the instance of the plaintiffs, that High Court had appointed Thiru M. S. Menon, advocate,as receiver to take charge of the said theatre and manage the same. After the receiver took charge of the theatre in the assessment orders the name of the assessee was shown as "Shri M. S. Menon", advocate-receiver (C.S. No. 6 of 1968). Shri Padmanabha Theatre Madras.

(2.) THE Income-tax officer adapted the status of the assessee as an "association of persons" in the assessment orders 1970-71 to 1973-74. According to him "association of persons" consisted of (1) P. P. Kannaiah Chetty, (2) P. Guruvittal (3) P. P. Mohanvittal (4) P. Lokanathan Vittal and (5) P. Muralivittal. Aggrieved by the assessment orders passed by the Income-tax officer treating the status of the dissolved firm during the receivership period as an "association of persons" the assessee went in appeal to the Appellate Assistant Commissioner but without success. THEreafter, the matter was further taken in appeal by the assessee to the Tribunal contending that the status of the assessee should be that of an "individual" and not of an "association of persons", that there has been dissolution of the partnership business by order of court that the receiver had taken possession of the theatre on July 13, 1969, and had been hiring it for exhibition of pictures therein that the receiver not having been appointed to carry on the partnership business but only to collect the rents in order to safeguard the interests of the plaintiffs there was no question of the receiver carrying on the business of the firm and that therefore the assessment order treating the status of the assessee as an "association of persons" cannot be legally sustained. Before the Tribunal the Revenue however contended that the business carried on originally by the firm was continued to be carried on by the receiver on behalf of the erstwhile partners of the firm and therefore the decision of the Supreme Court in N. V. Shanmugham and Co. v. CIT ,would squarely apply to this case and as such the assessee has to be assessed only in the status of an "association of persons". THE Tribunal after gong through the order of the High Court dated July 10, 1969, appointing Shri M. S. Menon as receiver and also the order of the High Court dated July 3, 1972,decreeing that the partnership stood dissolved as and from January 18, 1968, held that as the receiver was not carrying on any business but was only collection rents from the theatre as well as arrears, there was no unity of parties except to the extent of the common purpose of winding-up the business,that on the facts the principle of the decision of the Supreme Court in N. V. Shanmugham and Co.'s case , will not apply and that therefore the assessment in the status of an "association of persons" was not in order. In that view the Tribunal set aside the assessment and directed the Income-tax officer to make assessment on the receiver separately with reference to each member of the partnership. Aggrieved by the decision of the Tribunal the Revenue sought certain questions to be referred to the Tribunal as arising from the common order of the Tribunal. THE Tribunal referred the following common question in T.C. Nos. 1653 to 1655 of 1977 but refused to refer the other question referred to in the application filed by the Revenue under section 256(1) :

(3.) ACCORDING to learned counsel for the Revenue the conclusions of the Tribunal in this case that the receiver is not carrying on any business much less with the consent of the erstwhile partners and that on the other hand there was an intention to discontinue the business are all based on incorrect appreciation of facts. So long as the executed instrument in writing in respect of the income of the beneficiary (sic).