DAYABHAI AND COMPANY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN this reference under Section 66 (1) of the INdian INcome-tax Act, 1922, at the instance of the assessee Messrs. Dayabhai & Co. of Barwani, the question posed for our answer is:

(2.) THE facts of the case are as follows. One Dayabhai was carrying on under the name and style of "Dayabhai & Co." the business of plying buses and trucks, and exhibition of cinema films. THE permits for the running of stage carriages and trucks issued under the Motor Vehicles Act, 1939, were in the name of Dayabhai. In August 1954, Dayabhai admitted his brother Chhotabhai as a partner in this business. A partnership deed was executed between the two brothers on 1st August 1954. Under the agreement the two brothers shared equally the profits and losses of the partnership business which according to the deed consisted mainly of "Bus plying and Cinema exhibition." THE partnership business commenced from 1st August 1954. Clause 3 of the agreement between the two brothers stated:

(3.) THE assessee then preferred a second appeal to the Tribunal contending that the partnership constituted by the deed of 1st August 1954 was legal and valid; that there was no provision in the Motor Vehicles Act prohibiting the formation of a partnership for carrying on the business of running stage carriages and trucks; that the partnership firm could carry on business on the strength of permits obtained by a partner; and that no transfer for vehicles or permits in contravention of Sections 31 and 59 (1) was involved. THE Tribunal rejected all these contentions relying on AIR 1957 Mad 620 (supra) and an earlier decision of its own. It took the view that there was necessarily a transfer of vehicles and permits in contravention of the provisions of the Motor Vehicles Act referred to above when the firm carried on the transfer business on permits issued to Dayabhai. and consequently the partnership was illegal. In the view it took of the matter the Tribunal did not consider the effect of the terms of the partnership deed dated 1st August 1954, or determine the question whether Dayabhai's brother Chhotabhai took any part in the conduct of the business; and if so, what; or give any finding on the material before it whether there was in fact any transfer of vehicles and permits by Dayabhai to the firm in contravention of Sections 31 and 59 of the Motor Vehicles Act, 1939. It has been stated by the Tribunal in the statement of the case that in the appeal filed by the assessee no ground was raised in regard to cinema business.