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    Animal Farm Review Answers

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    Amita Sinwar
    This document summarizes a 1963 Supreme Court of India case that analyzed whether a cane concern was a partnership firm or co-ownership concern for tax purposes. The Supreme Court held that the High Court erred in determining it was a partnership based on the facts, and that it was actually a co-ownership concern based on differences between the two outlined in Lindley on Partnership. Specifically, there was no evidence of an agreement to form a partnership, one co-owner could transfer their interest without consent of the other, and respondents failed to establish mutual agency between the co-owners. As a co-ownership, Section 13 of the relevant Act applied, making the common manager liable for taxes rather than the appellants.

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    Animal Farm Review Answers

    Uploaded by

    Amita Sinwar
    160 views6 pages
    This document summarizes a 1963 Supreme Court of India case that analyzed whether a cane concern was a partnership firm or co-ownership concern for tax purposes. The Supreme Court held that the High Court erred in determining it was a partnership based on the facts, and that it was actually a co-ownership concern based on differences between the two outlined in Lindley on Partnership. Specifically, there was no evidence of an agreement to form a partnership, one co-owner could transfer their interest without consent of the other, and respondents failed to establish mutual agency between the co-owners. As a co-ownership, Section 13 of the relevant Act applied, making the common manager liable for taxes rather than the appellants.

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    This document summarizes a 1963 Supreme Court of India case that analyzed whether a cane concern was a partnership firm or co-ownership concern for tax purposes. The Supreme Court held that the High Court erred in determining it was a partnership based on the facts, and that it was actually a co-ownership concern based on differences between the two outlined in Lindley on Partnership. Specifically, there was no evidence of an agreement to form a partnership, one co-owner could transfer their interest without consent of the other, and respondents failed to establish mutual agency between the co-owners. As a co-ownership, Section 13 of the relevant Act applied, making the common manager liable for taxes rather than the appellants.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    160 views6 pages

    Animal Farm Review Answers

    Uploaded by

    Amita Sinwar
    This document summarizes a 1963 Supreme Court of India case that analyzed whether a cane concern was a partnership firm or co-ownership concern for tax purposes. The Supreme Court held that the High Court erred in determining it was a partnership based on the facts, and that it was actually a co-ownership concern based on differences between the two outlined in Lindley on Partnership. Specifically, there was no evidence of an agreement to form a partnership, one co-owner could transfer their interest without consent of the other, and respondents failed to establish mutual agency between the co-owners. As a co-ownership, Section 13 of the relevant Act applied, making the common manager liable for taxes rather than the appellants.

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    CASE ANALYSIS OF CHAMPARAN CANE CONCERN

    V. STATE OF BIHAR AIR 1963 SC 1737

    (Assignment towards the fulfilment of assessment in the subject of

    Contracts-II )

    Submitted by: Submitted to:

    Ayush Gattani (1499) Ms. Vidushi Puri

    Himanshu Rajpurohit (1504) (Faculty of Law)

    Ananya Singh (1537)

    NATIONAL LAW UNIVERSITY, JODHPUR

    WINTER SEMESTER (JANUARY- MAY 2018)


    FACTS

    The Champaran Cane Concern, the appellants, living in far off place of U.P. appointed a

    common manager, S.K.Kanodia, for facility of cultivation and management of land in

    Champaran (Bihar).The concern was assessed as a partnership firm for all the three years i.e.

    1948-49, 1950-51 and 1951-52 respectively, though the assesse claimed that it was a co-

    ownership concern, belonging to two persons, Padampat Singhania having Re. 0-4-0 share

    and Lala Bishundayal Jhunjhunwala having Re. 0-12-0 share. The concern, it was stated,

    carried on agricultural operations in six farms consisting of a little over Ac. 2,000of land. The

    further argument of the assesse was that the lands were undivided between the co-owners and

    the total net profits arising out of the joint cultivation were divided between the two co-

    owners. On these statements the assesse pleaded that S. 13 of the Act (Bihar Agricultural

    Income-tax Act) applied and the common manager should have been assessed in respect of

    the agricultural income-tax payable by them. The Board reduced the assessment under

    schedule C but did not accept the plea of the assesse that the assessments should have been

    made under S. 13 of the Act. The assesse then moved the Board of Revenue for making a

    reference to the High Court on the following question of law which it stated arose out of the

    order of the Board.

    ISSUE

    On the facts and circumstances stated in the cases, was the firm a partnership firm or a co-

    ownership concern?

    2|Page
    JUDGEMENT

    The High Court said that the question whether the assesse was a co-ownership concern or a

    partnership firm was a question of fact, and even otherwise, there were facts and

    circumstances from which it was open to the taxing authorities to come to the conclusion that

    the firm was a partnership firm. On this footing the High Court answered the question against

    the assesse. HC concluded the firm to be a partnership firm on the facts basically first is that

    the two co-owners joined together in appointing the common manager. And secondly the

    cultivation was made jointly on behalf of the two co-owners by the common manager and the

    profits arising there from were distributed to them in proportion of their respective shares.

    The assesse then moved to Supreme Court for special leave and having obtained such leave

    has brought the present appeals to Supreme Court from the decision of the High Court dated

    September 29, 1959.

    Supreme Court

    Appellant Conceded: s. 13 of the Act will not apply even if the assesse is a partnership

    firm.S. 13 in terms will apply if the assesse in the present cases is a co-ownership concern.

    S.13 of Bihar Agricultural Income Tax Act stated that where a common manager is

    appointed who holds land from which agricultural income is derived, on behalf of persons he

    will be liable to pay the aggregate of the sums payable as agricultural income-tax by each

    person on the agricultural income. Respondent Conceded: If the concern is really a co-

    ownership, then the s.13 will be applicable and this will favour the assesse.

    HELD

    The HC erred in deciding the concern as partnership firm on the Facts I &II as: -

    3|Page
    I. Two co-owners may appoint a common manager for facility of cultivation and

    management without entering into a partnership.

    II. The fact that the profits or even the losses are distributed in accordance with the

    shares of the two owners does not necessarily establish a partnership within the

    meaning of the Partnership Act, 1932.

    Then the Supreme Court put its basis of decision on differences between Partnership and Co-

    ownership by using “Lindley on Partnership”.

    1. Co-ownership is not necessarily the result of agreement, whereas partnership is. In the

    instant case, there is nothing in record to show any such agreement. So it’s not a

    partnership firm.

    2. Co-ownership does not necessarily involve community of profit or of loss, but

    partnership does. In the instant case, there is community of profit. So it’s in favour of

    both the parties.

    3. One co-owner can without the consent of the other, transfer his interest etc., to a

    stranger. A partner cannot do this. In the instant case, there was neither any evidence

    nor any finding that they can’t transfer their interest. So it’s a co-ownership firm.

    4. In a co-ownership one co-owner is not as such the agent, real or implied, of the other,

    whereas it is an essential of partnership firm. In the instant case, respondents failed to

    establish mutual agency in this case. So it’s not a partnership firm.

    The High Court made a reference to the returns filed on behalf of the assesse for the three

    years. These returns showed that in all the three years the assesse indicated its status as a co-

    ownership concern and the name of the assesse was shown as the manager, or Champaran

    Cane Concern or common manager.

    4|Page
    Court held that, fact and circumstances have been found in these cases from which the taxing

    authorities properly instructed in law could have come to the conclusion that the assesse was

    a partnership firm within the meaning of S. 2(k) of the Act. On the contrary the facts and,

    circumstances found by the taxing authorities were all consistent with the claim of the assesse

    that it was a co-ownership concern the common manager whereof was liable to assessment

    under S.13 of the Act.

    Assesse is a co-ownership, s.13 applicable, appellants not liable to pay but the manager.

    ANALYSIS

    This case clarified the essential differences between co-ownership and partnership those

    helped a lot of people in the legal fraternity as earlier most of the litigation revolved around

    the issue that is there partnership or not and there were differences in opinions of many

    jurists. The conclusion drawn by the Supreme Court is solely based on facts and

    circumstances which is not the usual practice of the courts as usually the conclusions drawn

    are based on the intermix of law and facts of the cases. The differences pointed out by the

    court are highly relevant even in the present scenario as reference to this case is made in

    every single book of partnership ever written.

    The act of Supreme Court of making a direct reference and taking the differences verbatim

    from “Lindley on Partnership” highlights the essence of England Laws which is deeply

    rooted in the Indian Laws as this book is purely based on case laws and practices adopted by

    the courts in England. Further back in 1963 when these practices were not that common as

    the judicial system of India has just started functioning, the Lordships in this case definitely

    deserve an applause for this bold departure from the normal path, which if would have taken

    might be resulted to miscarriage of justice. The importance of this case is also reflected by

    the fact that in the whole judgment no reference is made to any case law whatsoever as this

    5|Page
    area of law was very less developed and if we take a perusal of trailing cases on this issue

    reference is always made to this case and no deviation is there from the set principles.

    6|Page

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