COMMISSIONER OF INCOME-TAX, MADRAS versus SJVAKASI MATCH EXPORT COMPANY

Citation: [1964] 8 S.C.R. 18 · Decided: 29-04-1964 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

1964 
Cj.T., Madras 
v. 
Amrutan;an Ltd. 
Shah J. 
1964 
April, 29. 
18 
SUPREME COURT REPORTS 
But even that argument is of no value, for twenty-five per 
cent of the voting power attached to the ordinary shares is 
not exercisable by the public. 
Thi3, tlm·efore, is a case in 
which shares not entitled to a fixed dividend cauying not 
less than twenty-five per cent of the voting power are not 
shown to have been allotted unconditionally to, or acquired 
unconditionally by or beneficially held by the public. 
The 
Explanation, therefore, has no operation. 
Whether in view of the third proviso the company may 
be regarded as one in which the public are substantially 
interested, is a question to which no attention was paid by 
the Tribunal. 
Whether in fact there exists such a control· 
ling interest in the hands of one shareholder or a group of 
shareholders as would render the company one in which the 
public are not substantially interested is a question which 
therefore cannot be decided by this Court. 
The order of the High Court must therefore be con· 
tirmed, but on different grounds. The interpretation of the 
Explanation by the High Court, for reasons already set out, 
was 
incorrect. 
The Explanation had 
no 
application, 
because no presumption on the facts found could arise 
thereunder. 
The Revenue authorities have not made any 
investigation on the question whether there existed any 
controlling interest in a group of persons. so as to bring the 
c~se within the third proviso. 
The appeals must be dismissed with costs. One hearing 
fee. 
Appeals dismissed. 
COMMISSIONER OF INCOME-TAX, MADRAS 
v. 
SJVAKASI MATCH EXPORT COMPANY 
(K. SUBRA RAo. J. C. SHAH AND S. M. SIKRI. JJ.) 
Income Tax-Partnership deed-Application for registratio11-Discretion 
of [11come-tax Officer in granting Registration-Jurisdiction of the 
Income Tax Officer-Jurisdiction of High Court on reference on 
-• 
8 S.C.R. 
SUPREME COURT REPORTS 
19 
questions of fact-Indian Income-tax Act, 1922 (11 of 1922), s. 26-A 
-Indian Income-tax Rules, 1922, rr. 2, 3, 4. 
There were five 5.r..:is in Sivakasi manufacturing matches under the 
name and style of Shenbagam Match Works:, Brilliant Match Works, 
Manoranjitha Match Works, Pioneer Match Works and Gnanam Match 
Works. The sole proprietor of Shenbagam 
Match Works and 
ono 
partner from each of the four firms entered into a partnership in their 
individual capacity and executed a partnership deed dated April 1, 1950. 
The Income-tax Officer 
registered the said partnership lleed under s. 
26(A) of the Act; but the Commissioner of Income-tax acting under s. 
33B of the Act. cancelled the registration of the sai'd partnership deed. 
On appeaL the Tribunal held that the said partnership deed was not 
a genuine one. On a reference the High Court held on. a constn1ction 
of the partnership deed that the Match Works were not the real parties 
to the partnership -but the parties to the document were the real partners. 
This appeal has come by way of special leave. 
HELD:-(i) (per K. Subba Rao and S. M. Sikri JJ) that the discre-
tion conferred on the Income-tax Officer under s. 26-A of the Act is a 
judicial one and he cannot refuse to register a firm on mere speculation, 
but he shall base his conclusion on relevant evidence. The jurisdiction 
of the Income-tax Officer under s. 20-A is, confined to the ascertaining 
of two facts namely, 
(i) whether the application for registration is in conformity with 
the rules made under the Act, and 
(ii) whether the firm shown in the document. (Partnership deed) 
presented for registration is a bogus one or has no legal exis· 
tence. 
(ii) In the present case the partnership deed ex jacie conforms to 
the requirements of the law of partnership as well as the Income·tax 
Act. There is no prohibition under the partnership Act against a partner 
or partners of other firms combining together to form a separate part· 
nership to carry on a different business. The fact that such a partner or 
partners entered into a sub-partnership with others in respect of their 
share does not detract from the 
validity of the partnership; nor the 
manner in which the said partner deals with the share of his profits is 
of any relevance to the question of validity of the partnership. 
(iii) The tribunal erred in holding the partnership deed as not a 
genuine one. In the present case the assessee-firm has a separate ~egal 
existence, and as such the two circumstances ·relied upon b

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