LexDEPUTY COMMISSIONER OF SALES-TAX, (LAW) BOARD OF REVENUE (TAXES), ERNAKULAM versus MESSRS K. KELUKUTTY
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DEPUTY COMMISSIONER OF SALES-TAX, (LAW) BOARD OF REVENUE (TAXES), ERNAKULAM v. MESSRS K. KELUKUTTY May 3, 1985 (R.S. PATHAK AND E.S. VENKATARAMIAH, JJ.] Kera/a General Sales Tax Act 1963 : i3s Partnership Firms-Two-One de<J!ing in timber-Another selling saw dust-Partners comn:on in both firms-Assessment of sales tax-Whether to be treated as two firms. Taxation : A B c Partnership firrn-Assessment of partnership income-Duty of assessing D officer-First decide legaf identity of assessee and then apply relevant tax law. Indian Partnership Act 1932: Partners-Who are-Partnership agreement-What is-Intention of partners-Determination of The respondent in the appeal was a partnership firm dealing in timber and consisted of six partners. It filed returns of its taxable turnover for the assessment years 1968-69 and 1969-70 under the Kerala General Sales Tax Act, 1963 and the assessments were completed by the Sales Tax Officer. Subsequently, the Sales Tax Officer discovered that the respondent-firm owned a Saw Mill and that the Saw Mill was run by another partnership firm which consisted of the same partners as the respondent-firm. It was further noticed that during the relevant assessment years the Saw Mill firm had sold saw dust but had not been assessed to sales tax on that turnover. The Sales Tax Officer took the view that both she respondents- timber firm and the Saw Mill firm consisted of identical partners. the two businesses carried on respe- ctively, by them bad to be treated as the business of a single partnership firm and, therefore, the turnover of the sale of saw dust had to be included in the earlier assessments made on the respondent-Timber firm. The assessment orders were upheld by the Appellate Assistant Commissioner. The appeals filed by the respondent-Timber firm before the Sales Tax Appellate Tribunal were allowed and the cases were remanded for fresh consideration. The Revenue applied to the High Court, but the revision petitions were dismissed. The High Court relying on the decision of this Court in State. of ;~.--- E F G H 136 \ SUPREME COURT REPORTS (198SI SUPPL. s.c.ll. Punjab v. M/s. Jullundur Vegetables Syndicate, [1966] 17 STC 326 held that the A Saw Mill partnership firm was a partnership firm distinct from thC respondent Timber firm for the purposes of sa1es tax assessment and the turnover of the one could not be included in the turnover of the other. B c D E F Dismissing the Appeals to this Court, HELD: I. The approach adopted by the High Court is not sound: The true solution has to be found _not in the tax Jaw but in the partnership law. The orders of the High Court dismissing the Tax Revision Cases are maintained. The orders of the Sales Tax Appellate Tribunal remanding the case are confirmed. Instead of the cases going back to thC ·assessing officer they shall stand remanded to the Appellate Assistant Commissioner. [144 D-EJ . . . State of Punjab v. M/s. Jullundur Vegetables Syndicate [1966) 17 S.T.C. 326, distinguished. ' · · 2. Jn every case when the assessee professes that it is a partnership firm and claims to be taxed in that status, the first duty of the assessing officer is to determine whether it is, in law and in fact, a partnership firm. For determining whether there is a firm. the assessing officer will appiy th"e partnership law, subject of course, to any specific provision in that regard in the tax la\v modifying the partnership law. If the tax Jaw is silent, it is the ·partnership law only to which he will refer. Having decided the legal. identity ofthC assessee, that it is a partnership firm, he will then .turn to the tax law and apply its· relevant pfovisions for assessing the -partnership income • . [142 D-FJ Commisslorwr of Income· Tax, iveSt Benral v. A. W. Figg/es and Company and Others, (1953) 24 I.T.R. 405, Jes/ngbhai Ujamshi v. Commissioner· of Incon1e Tax, Bombay Mofussil, [1950] 181.T.R. 23, Jeshingbha/ Ujamshl v. Commissioner of Income Tax; Bombay, [1955) 28 I.T.R. 454, R.N. Oswal Hosiery and Mahabir Woollen Mills v. Commissioner. of lncon1e·Tax, Punjab, [1968) 70 l.T.R. 843~ Commissioner of Income-Tax, A.P.-111 v. G. Parlhasaralhy Naidu & Sons., (1930) 121l.T.R.97, Income Tax Commissioner for City of London v. Gibb,, 10 I.T.R. Suppl. 12t, referred to. '"·-........ In the instant case, there ~e two businesses, a business in timbCr and a bu:;iness in saw duSt. DOth businesses we
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