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National Engineering Corporation Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 346 of 1969
Judge
Reported in[1973]90ITR29(All)
ActsIncome Tax Act, 1961 - Sections 184
AppellantNational Engineering Corporation
RespondentCommissioner of Income-tax
Appellant AdvocateP.N. Pachauri, Adv.
Respondent AdvocateDeokinandan, Adv.
Excerpt:
- .....firm one of the activities turned out to be illegal that did not render the constitution of the firm illegal and on that ground the income-tax authorities were not justified in refusing registration or renewal. the appellate tribunal relied upon the case of jer & co. v. commissioner of income-tax, [1966] (60 i.t.r. 336 (all.).. that was a case where the entire object of the partnership was held to be illegal.7. even if plying of buses by the assessee was illegal there remains the fact that from its inception the assessee was carrying on the business of retreading tyres, the legality of which has not been assailed. the assessee was, therefore, entitled to the benefit of registration. in this view of the matter, it is not necessary for us to consider the further submission made by shri.....
Judgment:

Pathak J.

1. At the instance of the assessee the Income-tax Appellate Tribunal, Delhi Bench, has referred the following question of law for the opinion of this court.

' Whether, on the facts and in the circumstances of the case, the Tribunal was rjght in holding that the Income-tax Officer was justified in not allowing renewal of registration of the firm for the assessment year 1963-64?'

2. The assessee-firm was constituted on December 15, 1960. It carried on the business of tyre retreading and it was registered for the assessment year 1962-63.

3. The assessee sought the benefit of registration for the assessment year 1963-64. The Income-tax Officer found that in that assessment year the assessee had started the business of plying two buses which buses it did not own nor did it have any permits for plying them. In his opinion, that business was illegal. The Income-tax Officer held that as the firm was carrying on an unlawful business it was an illegal and invalid firm. Accordingly, he declined to extend the benefit of registration of the firm.

4. The order made by the Income-tax Officer was upheld both by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal.

5. The assessee then obtained this reference under Section 256(1) of the Income-tax Act.

6. From the statement of the case it appears that at its inception the assessee-firm was engaged in the business of tyre retreading. Subsequently, in the year 1963-64 it started the additional business of plying buses. Mr. Pachauri, appearing for the assessee, contended that the Tribunal was not right in holding that the business of plying the buses was illegal. He further submitted that even if that business was illegal the Income-tax Officer was not justified in refusing the benefit of registration as the business of tyre retreading, which was also being conducted by the assessee-firm, was a lawful business. In this connection, reliance was placed in the decision of this court in the case of Oudh Cocogem & Provisions Stores v. Commissioner of Income-tax, [1968] 69 I.T.R. 819(A11.). In that case, it was held that if out of several activities of a partnership firm one of the activities turned out to be illegal that did not render the constitution of the firm illegal and on that ground the income-tax authorities were not justified in refusing registration or renewal. The Appellate Tribunal relied upon the case of Jer & Co. v. Commissioner of Income-tax, [1966] (60 I.T.R. 336 (All.).. That was a case where the entire object of the partnership was held to be illegal.

7. Even if plying of buses by the assessee was illegal there remains the fact that from its inception the assessee was carrying on the business of retreading tyres, the legality of which has not been assailed. The assessee was, therefore, entitled to the benefit of registration. In this view of the matter, it is not necessary for us to consider the further submission made by Shri Pachauri that the Income-tax Officer was wrong in holding that the business of plying of buses by the assessee was illegal.

8. In the result, we answer the question referred in the negative. The assessee is entitled to its costs, which we assess at Rs. 200. Counsel's fee is assessed in the same figure.


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