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Documents citing Commissioner Of Income-Tax vs Luxmi Trading Co. on 7 April, 1978

Commissioner Of Income Tax vs Sindhubai Vasant Sahukar on 8 January, 1981

5. Shri Joshi, the ld. counsel for the Department, invited our attention to the two decisions in CIT v. Laxmi Trading Company (1953) 24 ITR 173 and Murlidhar v. CIT . These authorities were cited in support of the proposition that the concept of sub-partnership has been recognised in India since long before. As neither the Tribunal nor any party has disputed the proposition, consideration of these authorities unnecessary. The further submission was that all the three elements necessary for formation of partnership are very much present in the present case and are obvious on bare reading of the deeds and declaration. It seems to us that as far as this aspect is concerned, he is right. There was a business as well as an agreement for carrying it. Element of profit and loss and also of agency was there. Vasantrao was an agent of other members for carrying on the business on their behalf as a partner of Balaji Firm. Indeed he was made a trustee by them. One of the partner being authorised to carry on the entire business is not only not foreign but indeed is specifically provided for in the very scheme of the Partnership Act. Thus nature of agency can assume different form depending upon terms mutually agreed upon. It is an entirely different matter that as far as Balaji Firm is concerned it would not recognise anybody also excepting Vasantrao as partner even after the disruption of joint family status. Under these circumstances, in our judgment, there is no scope to come to the conclusion that the deed and the declaration did not in fact create a sub-partnership. This aspect however cannot close the controversy. There is yet one more crucial point in the case, and that is whether the so called sub-partnership is legal in view of s. 30 of the Partnership Act which in terms prohibits sharing of losses by a minor. Our view of the matter is that the present sub-partnership is illegal and therefore has no legal existence and as a result there cannot be clubbing of income u/s 64 of the IT Act for this reason. Here are our reasons for this conclusion.
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