1. These are four references under section 256(1) of the Income-tax Act, 1961. The two questions referred to us for our determination are as follows :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee carried on business or profession in Goa, Daman and Diu before the appointed day, namely, December 20, 1961 ?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was entitled to the benefits of concession contained in paragraphs 9, 16 and 17 of the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964 ?'
2. The assessee is a partnership firm registered under the Income-tax Act for the assessment year 1965-66 onwards. The assessment years with which we are concerned are the assessment years 1965-66, 1966-67,1967-68 and 1968-69. We are disposing of these references together because, although the questions have been referred on seven reference applications, the Income-tax Appellate Tribunal has made a consolidated statement of the the case in respect of all these reference applications. Two brothers, Roulu B. Rau (R. B. Rao) and Yeshwant B. Rao (Y. B. Rao) of Panaji, Goa, were living jointly with their respective wives and children. On July 26, 1959, they executed a document called a public deed which was registered. The parties to the said deed were R. B. Rao and his wife of the first part and Y. B. Rao and his wife of the second part. The said public deed recites that the contracting parties are brothers and lived since many years back under a common roof and in domestic economy in joint family system. The deed then sets out the properties and assets belonging to the joint family. These assets include a cinema house functioning at Panjim and a cinema house functioning in Mapuca. The public deed recites, in connection with these cinema houses, that they are owned by the contracting parties, namely, the joint family, the latter of the cinema houses, namely, the one at Mapuca, having been taken on lease by the said joint family. The deed then goes on to recite, inter alia, as follows :
'That the contracting parties wish to continue to live under the joint family system and select the male member senior to all, Roulu, to administer and represent the joint family, in accordance with the existing legislation, and give him all powers required in law to administer freely the joint family and represent it in any public offices or courts, and confer on him all the powers described in sections 36 and 37 of the Civil Procedure Code.'
3. The public deed goes on to recite that the joint family system would continue even if any of the present members die. The said joint family was known as ' M/s. Rao Societies Familiar '. We propose to refer to the said joint family as ' M/s. Rao Family Society '.
4. The joint family of M/s. Rao Family Society was dissolved by a deed of dissolution of joint family and division of heritages dated March 13, 1964. Unfortunately, no copy of the said deed of dissolution has been annexed, although the statement of the case states to the contrary. However, from the recitals in the statement of the case, it is clear that the said deed of dissolution was executed by R. B. Rao and his wife and their three sons with their respective wives and Y. B. Rao and his wife and their three sons. The deed of dissolution recites that R. B. Rao and his wife and Y. B. Rao and his wife were living in the joint family system contained in the decree of 1880 and that the joint family was established by a public deed dated July 26, 1959. The deed of dissolution goes on to narrate the various properties of the joint family and then states as follows :
'It is now the desire of the first and second parties to dissolve the joint family, what they do by this deed, and divide the mutual heritage, by mutual consent in the following way.'
5. The first and second parties to the said deed were R. B. Rao and Y. B. Rao. The division made pursuant to the said deed of dissolution was in the first instance between the two brothers, R. B. Rao and Y. B. Rao, and their respective wives. In turn by the said deed, each of the said two brothers with their respective wives divided their share of the joint family property and gave to their respective sons the shares to which, according to the deed, the sons had the right which is referred to in the said deed as 'legitim'.
6. On the same day of the deed of dissolution of the joint family, namely, March 13, 1964, a partnership deed was executed between R. B. Rao, Y. B. Rao and the three sons of R. B. Rao and three sons of Y. B. Rao. There were thus eight partners who executed the deed of partnership and the respective wives of R. B. Rao and Y. B. Rao were not parties to the deed of partnership. The partnership deed recites the events which led to the division of assets between the members of M/s. Rao Family Society and the parties to the partnership deed desired to continue to run the aforesaid cinema houses in partnership. The partnership was to come into effect from April 1, 1963. It may be mentioned that in respect of the earlier assessment year 1964-65 for the period from April 1, 1963, to March 13, 1964, the Income-tax Officer concerned had granted the benefit of the Taxation Concessions Order of 1964 to M/s. Rao Family Society which was assessed as an association of persons.
7. In the relevant assessment years, the assessee claimed the benefit of the concession admissible under the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964 (hereinafter referred to as 'the Concessions Order'), for the assessment year 1965-66 and the following assessment years with which we are concerned. The Income-tax Officer denied the assessee-firm, the benefit of the concessions order on the ground that the said firm or partnership which came into existence on March 13, 1964 (as constituted by the partnership deed dated March 13, 1964), was not in existence before the appointed day, namely, December 20, 1961, and did not carry on business on or before that date in Goa. On appeal, the Appellate Assistant Commissioner held that the assessee-firm was entitled to the concession as, in his opinion, the same persons who were the partners of M/s. Rao Family Society and carrying on business in Goa prior to the appointed day continued to do so from April 1, 1964, as partners of the assessee-firm. The Revenue preferred appeals to the Income-tax Appellate Tribunal. Before the Tribunal, the assessee urged that there was enough material to establish that the persons who functioned as partners from March 13, 1964, were also acting and carrying on business in a more or less analogous manner on the appointed day. The appeals were remanded by the Tribunal to the Appellate Assistant Commissioner to examine the fresh material. On remand, the Appellate Assistant Commissioner held that the persons working as partners of the assessee-firm were working on the appointed day in the same concern, that they were not employed on salary basis and that they were beneficially interested in the business carried on by all of them for their mutual benefit. On appeal to the Tribunal, the Tribunal came to the conclusion that even prior to the appointed day, the sons of R. B. Rao and Y. B. Rao were participating in the business of M/s. Rao Family Society not in the capacity of the employees but as co-owners. The Tribunal took the view that in the said business, the element of agency was involved, since there was evidence to show that the said sons had entered into agreements and contracts on behalf of the business concern as a whole. The Tribunal also observed as follows :
'... The Rao Societies Familiar, as stated earlier, was an association of persons and the facts show that it was more or less akin to a partnership known to the Indian law.'
8. On the basis of this conclusion, the Tribunal held that the conditions which the assessee had to fulfil in order to get the benefit of the concession granted by the concessions order were fulfilled in the case of the assessee and the assessee was entitled to the said concession. It is from this decision of the Tribunal that the aforesaid questions have been referred to us.
9. It is the submission of Mr. Dhanuka, learned counsel for the Commissioner, that the decision of the Tribunal is clearly erroneous. It was submitted by him that M/s. Rao Family Society which was the body carrying on the business of running the said cinema houses on the appointed day, could not be looked upon as a partnership at all, but was in the nature of a joint Hindu family to which a certain legal recognition was given under the provisions of the Decree of 1880 or the Portuguese Civil Code. It was submitted by him that, in any event, the wives of the two brothers. namely, R. B. Rao and Y. B. Rao, who were members of the said M/s. Rao Family Society and were parties to the aforesaid public deed under which the joint family called M/s. Rao Family Society was claimed to be constituted, were not parties to the deed of partnership dated March 13, 1964, and hence it could not be said that the present assessee was the same as the body of persons carrying on or running the said cinema houses on the appointed day. Mr. Pandit, learned counsel for the assesseee, on the other hand, urged that the said joint family constituting M/s. Rao Family Society was really in the nature of a partnership except for the fact that a partnership was not recognised as such under the law applicable in the territory of Goa. Mr. Pandit said that although the sons of R. B. Rao and Y. B Rao were not parties to the aforesaid public deed dated July 26, 1959, there was evidence, as held by the Tribunal, to show that they were participating in the business of running the said cinema houses and were doing so as co-owners of the said cinema houses. It was urged by him that the main test of a partnership, namely, the test of agency, was satisfied in this case and hence M/s. Rao Family Society was really a partnership.
10. In order to appreciate the contentions set out in the earlier paragraph, it is necessary to bear in mind a few relevant provisions. Section 128 of the portuguese Civil Code provided as follows :
'Familiar society is that which can be constituted between brethren or between parents and adult children. Such society is either express or implied.'
11. There was a decree dated December 16, 1880, which had the force of law in the territory of Goa prior to its merger with the Union of India and under section 17 of the same, it was, inter alia, provided that all properties, rights and powers possessed by a family of gentile Hindus living under a common roof and in domestic economy and everything acquired by its members shall be common and subject to the management of the respective kartas. Under sub-section (1) of the said section, certain properties were excluded from the aforesaid provision and were treated as individual and private parties. Section 18 of this Decree, inter alia, provided that the joint family will be governed, managed and represented by the seniormost male member who is capable under civil law. The relevant portion of section 4 of the Indian Partnership Act, 1932, runs as follows :
'4. ' Partnership ' is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.'
12. Under the Concessions Order, certain concessions were granted regarding income-tax chargeable under the Income-tax Act on its being made applicable to the Portuguese territory of Goa, Daman and Diu from April 1, 1963. Clause 3 of the Concessions Order contains the scope of the main concessions in relation to income-tax. Sub-clause (ii) of clause 3 of the Concessions Order, inter alia, provides that in order to obtain the benefits of the concession, the assessee claiming the concession must have resided or maintained a dwelling place in Goa, Daman and Diu for a period or periods amounting in all to one hundred and eighty-two days or more during the calendar year 1961 or carried on any business or profession in Goa, Daman and Diu before the 'appointed day'. The 'appointed day' was fixed as December 20,1961.
13. In our view, there are two central questions which arise in these references. The first question is whether M/s. Rao Family Society, which Carried on the business of running the said cinema houses on the appointed day, was a body which would have been recognised under the Indian Partnership Act or the law of partnership in India as a partnership, had it been functioning in India, and the second question is whether, even assuming that the said body did constitute a partnership as contemplated in Indian law, that partnership was the same as the assessee-firm or partnership.
14. Coming to the first question referred to in the last paragraph, we find that in order that a body of persons may constitute a partnership, it is essential that it must owe its origin to an agreement, although that agreement may be express or implied. In the present case, in our opinion, the body constituting M/s. Rao Family Society could not be said to originate in any agreement between the parties, express or implied. A perusal of the public deed which according to the assessee constituted the said joint family makes it clear that both the brothers, R. B. Rao and Y. B. Rao, and their respective families were living together since many years under a common roof and in domestic economy in the joint family system. In fact, the opening part of the deed makes it clear that the public deed is not intended to create a new relationship but is a confirmation of the existence of the said joint family and recognition of its karta. The relevant provisions of the Portuguese Civil Code and the Decree of 1880, which were applicable to the parties, make it clear that such a joint family as the one constituted by M/s. Rao Family Society was recognised as a legal entity under the relevant law applicable in Goa. The said legal entity came into existence by reason of the said family living together under a common roof and in domestic economy and hence it could not be said that that body owed its existence or origin to any agreement between the parties, express or implied. Even if we were to take the view that M/s. Rao Family Society was constituted by the aforesaid public deed, it is clear that the only parties to that public deed were R. B. Rao, his brother, Y. B. Rao, and their respective wives. The sons of these two brothers and their respective wives were not parties to this document at all, and it has not been urged on behalf of the assessee that there was any agreement by these sons, express or implied, which made them parties to the arrangement recited in the said public deed. In our opinion, therefore, M/s. Rao Family Society, which was the body carrying on the business of running the said cinema houses on the appointed day, could not be said to be a partnership firm at all, and hence it is not possible to take the view that it is the same as the assessee-firm before us. On this view of the matter alone, the question referred to us must be answered against the assessee.
15. Even assuming that M/s. Rao Family Society did constitute a partnership firm, in our view, it cannot be said that the said firm is the same as the assessee-firm before us. The parties to the public deed, under which M/s. Rao Family Society was constituted, according to the assessee, were only R. B. Rao and his wife and Y. B. Rao and his wife. Their sons were not parties to the said public deed at all, whereas in the deed of partnership dated March 13, 1964, which we have referred to earlier, the parties are R. B. Rao and his three sons and Y. B. Rao and his three sons. Thus, the respective sons of R. B. Rao and Y. B. Rao who were not parties to the public deed are parties to the partnership agreement and the respective wives of R. B. Rao and Y. B. Rao who were parties to the public deed are not parties to the partnership agreement dated March 13, 1964. In these circumstances, even if M/s. Rao Family Society was a partnership, it is not the same partnership as the one which is the assessee before us.
16. As regards the identity of the assessee-firm with M/s. Rao Family Society which carried on business in Goa on the appointed day, it was submitted by Mr. Pandit that under the deed of dissolution dated March 13, 1964, some partners retired from M/S. Rao Family Society and the remaining partners constituted the assessee-firm. It was submitted that the result of this was that the same organisation, namely, M/s. Rao Family Society, continued in the shape of the assessee-firm but certain members retired from it. There is no substance whatsoever in this argument. In the first place, as we have pointed out, the sons of R. B. Rao and Y. B. Rao, who are partners of the assessee-firm, were not parties to any agreement for constituting M/s. Rao Family Society. Moreover, the deed of dissolution dated March 13, 1964, contains recitals which are only consistent with the dissolution of an existing joint family business or partnership, and not with the retirement of any members or partners. In the first place, it is not altogether without significance that the document is described as a deed of dissolution. What is more important is that under this deed all the assets of M/s. Rao Family Society have been partitioned or divided between the sharers in those assets. This sort of division is inconsistent with the document being a record of the retirement of certain partners from the firm and continuation of other partners. This argument also of Mr. Pandit must be, therefore, rejected.
17. In the result, the questions referred to us are answered as follows :
Question No. 1 : In the negative.
Question No. 2 : In the negative.
Both the questions are answered against the assessee.
18. The assessee to pay to the Commissioner the costs of these references in one set.