Law:

Section:

JUDGMENT Shah, J.-T he assessee is a limited liability company. Before the year 1947 the assessee used to carry on its business of a "rolling mill" in the territory which now forms part of Pakistan. The assessee was a member of the Steel Rolling Mills Association of India and was receiving a quota of coal and steel from the Government of India. After the partition of India, the registered office of the assessee was shifted to Bombay. In Bombay the assessee had no factory of its own where it could take advantage of the quotas of steel and coal. The assessee, therefore, entered into an agreement of partnership with one K.R. Irani who had put up a factory in Bombay styled as New Era Iron & Steel Works, but who had himself no quota of steel and coal. Under the terms of the agreement the partnership was to continue so long as the quota system relating to steel was continued in the Dominion of India or till the expiry of the lease of the factory premises whichever was the later date. By clause 12 of the partnership agreement it was provided that the assessee, in consideration of taking K. R. Irani as a partner in the partnership, was to receive a sum of Rs. 50 per ton on all steel received by the partnership from the assessee. By clause 13 it was provided that all the quota of steel and coal that the assessee may receive from the Iron & Steel Controller, the Government of India, under the quota system that may be in force from time to time for steel re-rolling mills of the assessee at Bombay shall be utilised solely for the purposes of the business of the partnership. This partnership agreement was recorded on 29th September, 1948. The terms of the partnership agreement were modified on 9th September, 1954, by another agreement, and certain additional covenants were added thereto. By clause 5A it was provided that the benefit of all the factory land for which rent was being paid by the partnership shall belong wholly to the partnership even though the lease stood in the name of K.R. Irani: and by clause 5B it was provided that the benefit of the licence for supply of electricity which stood in the name of New Era Iron & Steel Works shall wholly belong to…

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