SAMBHAJI RAO Vs. STATE OF M P

JUDGEMENT

(1.) THIS is a petition by Sambhaji Rao who is a partner in a firm called "Krishna Concerns". He has 1 /5th share in the partnership. THIS firm was assessed for two periods viz., July 1965 to June 1966 and July 1966 to June 1967, assessment years being 1967-68 and 1968-69. The firm was assessed under the M. P. Vritti, Vyapar, Ajivika Aur Sevayojan Kar Adhiniyam, 1966 (hereinafter referred to as the Act). The firm was assessed for each of the two assessment years to a maximum tax of Rs. 250 permitted under the Act and a penalty of Rs. 60 was imposed for not filing the re'urn Thereafter, the petitioner has been personally taxed under the same Act on his own personal income including the share which he received from the profits of the partnership. He has been assessed to a tax of Rs. 200 and a penalty of Rs. 50 for the assessment year 1967-68 and to a tax of Rs. : 50 and a penalty of Rs. 60 for the assessment year 1968-69. THIS writ petition has been filed challenging this personal assessment of the petitioner.

(2.) LEARNED couqsel has raised two objections: (1) that the firm hav'rg ben assessed, the partner' could not be assessed on the same income and (2) that no penalty could be imposed as the income of the petitioner from house prqperty alone was not taxable under the Act and there was, therefore, no question of filing a return. The second question is obviously answered in favour of the petitioner if the first contention is correct of that if the petitioner is not taxable over the share of his partnership income, then his income from property alone was not taxable and there was no question of hi? filing a return and that being so, no penalty could be imposed on him. We, therefore, consider the arguments on the first question.

(3.) IN the present case, five persons combined together in the activity of earning profits. The profits so earned were taxed in the hands of the firm and when this income, less tax, is distributed among its partners by the firm, the tax is really paid by all the partners of the firm according to their share. Moreover the mere distribution of the profits between the partners does not amount to a second earning by the partners of the same income by any of the activities mentioned in the definition. The partners merely receive their share on distribution and their activity which earned the profit was the activity on behalf of the firm which has already been taxed. We are, therefore, of opinion that the contention of learned counsel for the petitioner has substance and the profit earned by the firm, when distributed to the partners, does not become an income taxable under the Act in the hands of the partners.