Law:

Section:

Part II, Clause (iii)(A) of Paragraph D of the Finance Act, 1964 - Rules of Super Tax - Assessment Year 1964-65 - Whether business carried on by a partnership firm is in reality business carried by its partners, and, as such assessee-company deriving share income as a partner from a partnership firm which was engaged in manufacturing business had to be deemed to be engaged in manufacturing business and, thus, entitled to a rebate of 30 per cent - Held, yes FACTS The assessee-company was a 50 per cent partner in a partnership firm. For the assessment year 1964-65, the ITO allowed a rebate at the rate of 20 per cent in the computation of corporation tax. On an application under section 154 claiming that since the firm from which share income was derived, was engaged in manufacturing business, the assessee-company itself should be deemed to be so engaged, thereby eligible for a rebate at the rate of 30 per cent, the ITO held that since the assessee itself was not engaged in any manufacturing business, it was not entitled to the rebate claimed. On appeal, the AAC upheld the ITO's order on the ground that the alleged error in the rate of rebate was not an error apparent from the record, and, as such, section 154 was not applicable. On second appeal, the Tribunal held that the case fell within the purview of section 154, and also that the assessee was entitled to the rebate of 30 per cent relying on its earlier order in the assessee's own case for the assessment year 1965-66. On reference: HELD Under section 4 of the Indian Partnership Act, a 'partnership' is defined as the relation between persons who have agreed to share the profits of the business carried on by all or any of them acting for all. It follows, therefore, that the business carried on by a partnership firm is in reality the business carried on by the partners. When a firm is engaged in a business each partner shall be deemed to be so engaged. This principle appears to have been recognised by the Act. When an assessment is made against a partnership firm carrying on business, the share of each partner is also assessed as income from business and not as income from other sources, even if a particular…

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