JOSHI AND VARMA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS is a reference at the instance of the assessee under S. 256(1) of the IT Act, 1961, and the following question has been referred to us :

(2.) THE assessee is a firm constituted of two partners both of which are joint stock companies, viz., (1) S.B. Joshi & Co. (P) Ltd., and (2) Mangaldas N. Verma (P) Ltd. The partnership between these two entities was specifically formed for the purpose of executing a contract for the construction of an aqueduct across the river Parvati in Chambal Hydel and Irrigation Project in the State of Madhya Bharat. The business of the firm had actually commenced on 1st Nov., 1954, though the partnership deed is one dt. 29th Jan., 1955. The partnership deed is annex. "A" to the statement of case, but cls. 1 and 20 thereof appear to be material and the same read as follows :

(3.) THE assessee carried the matter in appeal to the AAC. Before the AAC, it was contended that it was not correct to say that the business activities of the firm had come to an end when the construction work was completed. It was urged that a number of bills had been submitted to the Madhya Pradesh Government which were pending sanction and the activity to get such bills settled itself formed a business activity. The AAC, however, did not accept this contention and agreed with the ITO that after the completion of the construction work the firm did not carry on any business in the year under appeal. He, accordingly, dismissed the appeal.