Law:

Section:

SECTION 4 OF THE PARTNERSHIP ACT, 1932 READ WITH THE KERALA SALES TAX ACT - PARTNERSHIP-GENUINENESS OF - TWO FIRMS CONSISTING OF EXACTLY SAME PARTNERS WERE CARRYING ON DIFFERENT BUSINESSES - WHETHER THEY COULD BE TREATED AS A SINGLE PARTNERSHIP FIRM FOR PURPOSES OF SALES TAX ASSESSMENT ON TURNOVER OF BOTH BUSINESSES WITHOUT DECIDING INTENTION OF PARTNERS WITH REFERENCE TO TERMS OF AGREEMENT AND ALL SURROUNDING CIRCUMSTANCES, INCLUDING EVIDENCE AS TO INTERLACING OR INTERLOCKING OF MANAGEMENT, FINANCE AND OTHER INCIDENTS OF RESPECTIVE BUSINESSES - HELD, NO Facts The respondent-firm was dealing in timber. 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 STO. Subsequently, the STO discovered that the partners of the respondent-firm owned a saw mill and the saw mill was run by a firm 'K' which consisted of the same partners as the respondent-firm. He found that during the assessment years under consideration they had sold saw dust from the mill, but had not been assessed to sales tax on that turnover. The STO held that as both the respondent and 'K' consisted of identical partners, the two businesses carried on respectively by them had to be treated as the business of a single firm and, therefore, the turnover of the sale of saw dust had to be included in the earlier assessments made on the respondent. On appeal, the AAC also upheld the STO's order. On second appeal, the Tribunal, however, accepted the respondents' claim and remanded the matter for fresh consideration. On revision application by the revenue, the High Court upheld the Tribunal's order taking the view that 'K' was a firm distinct from the respondent for the purposes of sales tax assessment and the turnover of one could not be included in the turnover of the other. On appeal: Held For the purposes of assessment to tax the income of the partnership firm has to be assessed in the hands of the firm as a single unit, the firm itself being treated as an assessable entity separate and distinct from the partners constituting it. The firm is an assessable unit separate and distinct from…

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