LexCHAMPARAN CANE CONCERN versus STATE OF BIHAR AND ANR.
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.... -~ • 2 s.c.R. SUPREME COURT REPORTS 921 CHAMPARAN CANE CONCERN v. STATE OF BIHAR AND ANR. (S. K. DAS, A. K. SARKAR and M. HIDAYATULLAR jj.) Agricultural Income Tax-Asses.ment-Land owned by two persons in share.s-Oommon Manager appointed-Partner .. ship or co-ownership-1'est-Bihar Agricultural Income Tax Act, 1948 (Act 32 of 1948), ss. 2, 3, 13, 28 ( 3)-Indian Partnership Act, 1932 (Act IX of 1932), s. 2 (k), 4. The Champaran Cane Concern, appellant, carried on agricultural operations in lands owned by two persons. One of these two persons had a share of four ~nnas in a rupee and other twelve annas in a rupee. They appointed ·another person as a common manager for facility of cultivation and manage- ment. There was no partnership agreement entered into by these two persons. In the returns submitted to the tax authorities for the assessment years the concern was ~hown as .a "firm''. The Agricultural Income 'fax authorities assessed the appellant for three years. on the basis that the appellant wa• a partnership firm under s. 3 ot tbe Bihar Agricultural Income Tax Act, 1948. The assessee claimed that it was not a partner- ship firin hut a co-ownership concern and that it could be asse- ssed only under s. 13 of the said Act. This plea was rejected by the Income Tax Officer. Appeals were filed to the Deputy Commis.sioner of Agricultural Income Tax and the same were dismi5'ed. Applications for revision were then filed before the Board of Revenue. rhe Board did not accept the plea of the present appellant that the assessment should have been made under s. 13 of the Act. Thereafter an application was made to the Board, for making a reference to the High Court whic)l was refused. Thereupon, the High Court was moved under s. 28 (3) of the Act for a reference by the Board and the High Court called for a reference. The High Court held that the question whether, the assessee was a co-ownership concern or a partnership firm was a question of fact, and that there were facts and circumstances in the case from which it was open to the taxing authorities to come to the conclusion that SU:fREME COURT REPORTS [1964] VOL. the concern was a partnership firm. The High Court answered. -.. -.-.- ,the reference ~g_ainst the asse.,ee. The present appe~l was-filed C~pa;a~ Can1 by Special leave of this Court. Concern / v. Stat• of BiM< In the appeal before this Court substantially the same - questi:>ns \vere rabied as before the High Cour!, the taxing authOrities and the Board of Revenue. Held that. the question whether a concern is a partner-· ship or not, is a mixed question of facf?-nd law and if.the authorities who have to ascertain that question apply a wrong principle of law in inStructing- themselves as to what they have to find, then their finding of fact is not conclusive because they have done it under wrong principle. Moder:i Rigg & Co. and R. B. Eakrigge & Co. ".·Monks (1923) 8 T. C. 450, referred to. Hdd further that the appointment of a common manager ,Dy two co·ow11ers acting tl}gether is consistent with either view and does not clinch the issue in favour of a partnership. ·The mere fact that the profits or even losses arc dislributed in accordance \Vith the shares of the two owners does not necessarily ·establish ~ partnership within the meaning of the Partnership Act. One of the principal differences between a partnership and co-ownrrship is that -co-ownership is not necessarily the result of agreement whereas partnership is. The second difference is that co-ownership does not necessarily involve community of profit or of loss but partnership does. Another ~ifference is that one co-o\vner can "vithout the consent of other, transfer his inti;rcst etc. to a srran~er but a partner cannot do this. Fourthly, in a, partnership each partner acts for all but a co-owner is riot such an agent real or implied of the other. A mistake by ·the Revenue Board in framing the question for reference to the High Court will nof cllange the real position in law. Simply because a co-ownership concerrt has descrihed L.'.. itself as a "firm" in the printed forms of return does not 'necessarily m-ean that ir is· a partnership· firm withjn the meaning of s. 4 of the Indian Partnership Act as indicated \n " 2 (k) of tho Act. ' • --- • • ' 2 S.C.R. SUPREME COURT REPORTS \123 From the facts and circumstances of'the case it is found that .the a
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