High Court Of Calcutta
Gouranga Lal Chatterjee & Ors. vs. ITO & Ors.
Section 2(31), 4
Asst. year 1987-88
Matter No. 1524 of 1988
27th November, 2000
Pal, for the Petitioners : D.K. Som, for the Respondents
Sengupta, J. :
In this writ petition in spite of rule being served no affidavit-in-opposition has been filed to contest this application Mr. Som, learned advocate appearing on behalf of the respondents informs the Court that the relevant file relating to this case is not traceable surprisingly. So no affidavit-inopposition could be or at this stage can be filed. So I have no opinion but to proceed on the basis that the allegations contained in the writ petition are true and correct since no opposition has been filed.
2. The brief facts of this case are as follows : Petitioners Nos. 1 and 3 are partnership firms. Both at the relevant point of time were registered under the Indian Partnership Act, 1932, and also under the IT Act, 1961. Petitioner No. 2 is one of the partners of petitioner No. 1 while petitioner No. 4 is one of the partners of petitioner No. 3. Petitioners Nos. 1 and 3 are assessees in their capacities as firms so also the respective partners are individually assessed. Petitioner No. 1 procured a contract for construction of a concrete-cumboulder masonry dam on the river North Koel at Mondal, District Daltonganj, in the State of Bihar. Since the value of the construction was high, in order to have financial assistance, petitioner No. 1 by an agreement in writing brought petitioner No. 3 as a working partner sharing profit and loss at the rate of 60 per cent and 40 per cent. However, the books of account of the aforesaid income arising out of the contract were maintained by petitioner No. 1. Both the partnership firms showed their incomes in terms of the agreement. Accordingly, they were assessed during the years 198485, 1985-86, 1986-87 and 1987-88. Even the partners of the aforesaid two partnership firms were duly assessed during the aforesaid relevant time. Assessment orders were also passed particularly for the relevant assessment year. In the background of the aforesaid facts the impugned notice dt. 9th March, 1988, under s. 139(2) of the IT Act, 1961, has been issued in the names of Gouranga Lal Chatterjee and Chatterjee Eastern Syndicate. The aforesaid notice is under challenge. I record that at the ad interim stage interim stay of operation of the said impugned order was granted and since then this interim order has still been continuing.
3. It is contended by Mr. Pal, senior advocate, that Gouranga Lal Chatterjee and Chatterjee Eastern Syndicate cannot be termed to be an assessee as there cannot be any joint venture under the law, of the two partnership firms which do not have any legal entity. In this connection, he relies on a decision of the Supreme Court in Mahabir Cold Storage vs. CIT (1991) 91 CTR (SC) 89 : (1991) 188 ITR 91 (SC). Moreover both the firms have duly been registered under the IT Act and they were assessed separately and the assessment orders were passed. According to him after the assessment orders were passed for the relevant year 1987-88 in respect of their returns filed by the partners of both the firms it was not open to ask for further returns in respect of the self-same income which has been assessed for payment of tax.
4. Mr. Pal argues that this identical point involved in this application was decided by Justice Ms. Pal (as her Lordship then was) on 8th Feb., 1991, in matter being No. 2780 of 1990 (Gouranga Lal Chatterjee vs. ITO). He argues that in the aforesaid judgment it has been held amongst other than returns of the income from the joint venture in the hands of the petitioner firms, could not be asked for, as that would amount to double taxation. He further argues that Justice D.P. Kundu on identical facts and circumstances as this case has also followed the aforesaid judgment of Justice Ms. Pal and held that aforesaid proposition of law. Moreover, his Lordship was also pleased to hold that the aforesaid combination cannot be termed to be a joint venture of individuals. Under such circumstances on both the points the writ petition should succeed and I should set aside and quash the aforesaid impugned notice.
5. Mr. Som, learned advocate for the respondents, submits that the aforesaid two partnership firms have formed a joint venture. This combination of two unincorporated bodies is a person within the meaning of s. 2(31), sub-cl. (v) of the Act. In support of his argument, he relies on two decisions of the Supreme Court, one is reported in Meera & Co. vs. CIT (1997) 139 CTR (SC) 442 : (1997) 224 ITR 635 (SC) : TC S44.3808 another is reported in CIT vs. Indira Balkrishna (1960) 39 ITR 546 (SC) : TC44R.916. He contends that the decisions of Justice Ruma Pal (as her Lordship then was) and Justice D.P. Kundu have not decided this point. So I should decide this point. So far as the merits are concerned it is open for the writ petitioner to satisfy the ITO concerned that the income of the said persons, viz., BOI is not assessable, as it has already been assessed.
6. Having heard the respective submissions of the learned advocates two points emerge here for adjudication. (i) Whether the aforesaid combination of the two firms intending two set up a joint venture can be termed to be a person within the definition of s. 2(31), sub-cl. (v), to charge tax under s. 4 of the IT Act, 1961. (ii) Whether the income of the aforesaid combination of the two firms earned through petitioner No. 1 in respect of the aforesaid contract can be subjected to further assessment or not.
Mr. Pal tries to convince me that Justice Kundu has decided in his Lordshipâs judgment in W.P. No. 5035 of 1987 (Gouranga Lal Chatterjee vs. ITO) that the aforesaid combination of the two partnership firms is not “person” within the definition of s. 2(31)(v) of the IT Act, 1961. With respect I do not find any decision on this issue by Justice Kundu in his Lordshipâs judgment; as rightly said by Mr. Som. Justice Ms. Pal has not decided this issue either. So, it is incumbent upon me to decide this issue as I have been called upon. Two partnership firm both are assessees, formed joint venture for particular works. In the case of Mahabir Cold Storage vs. CIT (supra), it has been observed by the Supreme Court that under the Indian Partnership Act, 1932, a partnership firm registered thereunder is neither a person nor a legal entity. It is merely a collective name for the individual members of the partnership firm. A firm as such cannot be a partner in another firm though its partners may be partners in the other firm in their individual capacity.
9. In this case, the impugned notice has been issued upon G.L. Chatterjee and Chatterjee Eastern Syndicate treating the aforesaid joint venture to be a BOI. In the first place I observe that the aforesaid addressee of the impugned notice cannot be a BOI. It is a combination at the highest, of two partnership firms. Under the definition of s. 2(31), sub-cl. (v), in order to determine AOP or BOI the persons and/or individuals must be a juristic legal entity. Since by the aforesaid judgment, the Supreme Court has decided the partnership firm is not a juristic legal entity, so, the aforesaid, joint venture cannot be termed to be either an AOP or a BOI.
The partnership firms are constituted by persons, individuals, namely, human beings or it may be constituted by corporate bodies and/or statutory bodies who are having juristic legal entity. Therefore, I am of the view that the concerned ITO has no jurisdiction to issue the impugned notice inasmuch as the addressee, G.L. Chatterjee and Chatterjee Eastern Syndicate is not “person” within the meaning of s. 2(31)(v) r/w s. 4 of IT Act, 1961.
10. The decision cited by Mr. Som rendered by the Supreme Court in Meera & Co. vs. CIT (supra) is factually distinguishable because in that case after the death of the sole proprietor of a business, the entire business devolved upon the heirs and legal representatives of the deceased proprietor, namely, the widow and minor children. In that case, it was held by the Supreme Court that the mother and the minor children are a BOI. So, the profit was taxable in the business of the said firm holding that the aforesaid persons are a BOI. As I have already held and observed that the said joint venture does not constitute a BOI, this judgment is of no assistance.
11. Similarly, another decision cited by Mr. Som, CIT vs. Indira Balkrishna (1960) 39 ITR 546 (SC) : TC 44R.916 is not applicable in this case and the said case was factually distinguishable. In that case also the individual, persons, namely, human beings constituted BOI and/or an AOP.
12. In order to decide the next question, the second question, I am not troubled much to decide the same inasmuch as in two other cases by learned single Judges of this Court, between the same parties on identical facts it has been held that the authorities after having accepted disclosure of the income from the joint venture in the hands of the respective petitioner firms and the same being assessed it was not open for the Department to ask for returns in order to levy tax in respect of the same income from the joint venture.
13. It appears from the petition that both petitioners Nos. 1 and 3 have filed their returns in relation to the income drawn from the profit of the civil construction works of North Koel Dam and such income has been assessed and tax has been levied. Therefore, the respondents are not permitted after having accepted the above position, to proceed against the aforesaid two partnerships treating them to be a joint venture and/or BOI in order to levy tax. This exercise, in my view, in nothing short of double taxation. Therefore, I hold that this writ petition should succeed and hereby succeeds. Accordingly, the impugned notice is liable to be and is hereby set aside. Interim order already passed stands confirmed. There will be no order as to costs.
[Citation : 247 ITR 737]