1. We are called upon in this reference at the instance of the assessee to answer the following question :
'Whether, on the facts and in the circumstances of the case, the assessee could be held to have carried on any business in Goa before the appointed day so as to become entitled to the concession as provided in Para. 9 read with Para. 3(1)(iii) of the Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964 ?'
2. The assessee carried on the business of road, building and forest contractor in the Union territory of Goa during the relevant assessment years 1964-65 to 1969-70. The Partnership Act was extended to Goa with effect from March 15, 1964. A partnership deed was executed by the partners of the assessee on March 30, 1964.
3. The I.T. Act became applicable to Goa on and after April 1, 1963. The Dadra and Nagar Haveli and Goa, Daman and Diu (Taxation Concessions) Order, 1964, gave to the assessee who carried on any business in Goa before the appointed date, i.e., December 20, 1961, the benefit of the concessions therein stated.
4. The assessee claimed the benefit of the concessions under the said Taxation Concessions Order on the ground that it had been carrying on business in Goa before the appointed date. The ITO declined to extend to the assessee such concessions upon the ground that 'the entity which carried on the business during the previous year is different and distinct from the entity which carried on business on the appointed day.' The assessee appealed and before the AAC certain documents and affidavits were filed. The AAC allowed to the assessee the concessions claimed by it. The Revenue appealed to the Tribunal which came to the conclusion that there was no proof that the same entity as the assessee was carrying on business in Goa before the appointed day. At the instance of the assessee, this reference has been made.
5. The deed of partnership dated March 30, 1964, recites that the four parties therein mentioned were 'carrying on jointly the business of forest contractors, roads and building contractors...' and '... are desirous of continuing the said business in partnership on terms and conditions....' thereinafter appearing. Three of the said four partners made affidavits before the AAC which stated that they and the fourth man were carrying on construction and business in partnership and had been as such carrying on the above business jointly since long prior to the year 1961. A certificate of Superintending Engineer, Public Works Department, Panaji, Goa, produced by the assessee certified that to the best of his knowledge the four persons therein named were carrying on jointly the business of construction and timber in Goa for a long time prior to December 19, 1961. A certificate by the Sarpanch of Kurti Kandepar Gram Panchayat stated that the four persons 'have been carrying on jointly as contractors' and timber business in Goa for a long time prior to December 19, 1961.'
6. Upon this material, the Tribunal said thus :
'19. The assessee is a partnership concern. A stand has been taken that a partnership constituted of the same members was doing business earlier. We do not think that the assessee has been able to prove that a firm as such was functioning before the appointed day. The basic requirements of a partnership are : (1) that there must be an agreement entered into by all the persons concerned, (2) the agreement must be to share the profits of a business, and (3) the agreement must be carried on by all or any of the persons concerned acting for all. All those elements must be present before a group or association can be held to be partners. It is not that an instrument of partnership is necessary but there must be an agreement. One has to look to the essence of the transaction and if it is in essence a partnership, then the necessary consequence would follow. Whether the relation of partnership between two or more persons does or does not exist depends upon the real intention and the conduct of the parties. In each case, the cumulative effect of the facts and circumstances is to be taken into account.
20. In the certificate of the Superintending Engineer, he has only certified for the fact that the four persons who now constitute a partnership were carrying on jointly business of construction and timber. The certificate of the Sarpanch is also to the same effect.
Three of the partners had also an affidavit stating that all of them were carrying on business jointly prior to 1961. Simply carrying on business is not enough to constitute a partnership. A partnership is an amplified version of the doctrine of agency. The element of agreement is further an essential ingredient. It is a voluntary contractual relationship. It can arise as result of an agreement express or implied. The element of agreement in partnership distinguishes it from various other relations which arise by operation of law and from agreement. This is illustrated in the case of joint owners, joint heirs and joint legatees among other persons having joint or common interest in property who do not simply by reason of their community of interest become partners. The most important ingredient is of mutual agency. The fundamental principle is that partners when carrying on business of a firm are agents as well as principals. There is no proof on record that the group of persons who were said to have been doing business jointly were acting in such capacity. Carrying on business jointly may denote an agreement, yet as to whether each can represent the others and vice versa has to be shown.'
7. We quote the observations of the Tribunal in these paragraphs in full because we are entirely in agreement therewith.
8. Mr. Pandit, learned counsel for the assessee, drew our attention to the phraseology of Para. 3(1)(ii) of the Taxation Concession Order, which reads thus :
'(ii) the provisions of paragraphs 5 and 6 of this Order shall apply in the case of every assessee who 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 and is assessable as a person resident in India in the previous year but would not have been so assessable if the Income-tax Act, 1961, had not been extended to Goa, Daman and Diu, to so much of his income included in his total income as accrues or arises in the Union territories or outside India and is not deemed to accrue or arise or is not received or is not deemed to be received in any part of India other than the Union territories;'
9. Mr. Pandit submitted that it was not necessary thereunder that the assessee is liable to be taxed in the same status before and after the appointed day. In other words, his submission was that the individuals were the assessees and they eligible to obtain the concessions under the Taxation Concessions Order, if they had been carrying on business in Goa before and after the appointed day; it did matter that before the appointed day, they had not been carrying on business in partnership, for, 'the firm' was only the status in which they were liable to be assessed Reliance was placed upon the judgment of the Allahabad High Court in ITO v. Vinod Krishna Som Prakash : 117ITR594(All) ; wherein it was held relying upon Explanation 2 to s. 143 that the assessment 'of a firm as a registered firm or as an unregistered firm is a matter of status'.
10. We are unable to accept Mr. Pandit's argument. Section 2(7) defines 'an assessee' to mean a person by whom any tax or any other sum of money is payable under the Act. 'Person' is defined by s. 2(31) to include a firm. Section 4 places the charge of income-tax upon the total income of every person. Quite clearly, therefore, a firm is an assessee liable to income-tax. Further, Explanation 2 to s. 143 says that status, where the assessee is a firm, means its classification as a registered firm or an unregistered firm. It is clear, therefore, that where the assessee is a firm, it must, to obtain the benefit of the concessions under the Taxation Concessions Order, have been carrying on business in Goa before the appointed day.
11. Before we part with this matter, we put on record that we do not approve the observation of the Tribunal in paragraph 21 of its order that it has to be proved that the 'assessee with the same constitution and beneficial ownership was carrying on business before the appointed day.' This seems to us to be too strict an interpretation.
12. We answer the question put to us in the negative, i.e., in favour of the Revenue.
13. The assessee shall pay to the Revenue the costs of the reference.