S.K. Das, J.
1. The Champaran Cane Concern, appellant before us, was assessed toagricultural income-tax under the Bihar Agricultural Income-tax Act (Bihar Act32 of 1948), referred to as the Act in this judgment, by the AgriculturalIncome-tax Officer, Motihari for three years 1356 F. 1357 F. and 1358 F.corresponding to 1948-49, 1950-51 and 1951-52 respectively. It was assessed asa partnership firm for all the three years, though the assessee claimed that itwas a co-ownership concern belonging to two persons, Padampat Singhania havingRe. 0-4-0 share and Lala Bishundayal Jhunjhunwala having Re. 0-12-0 share. Theconcern, it was stated carried on agricultural operations in six farmsconsisting of a little over Ac. 2,000-00 of land out of which about Ac. 1,600-00were purchased jointly by Padampat Singhania and Bishundayal Jhunjhunwala andAc. 483-00 were purchased in the name of a mill, namely, Motilal Padampat SugarMill of which the aforesaid two persons were the owners. Later on by aresolution of the mill-company, the farms were separated from the mill and thelands in their entirety were cultivated by the concern. As nothing now dependsupon the distinction between the lands purchased in the name of the mill andthose acquired otherwise, we shall ignore the distinction for the purpose ofthese cases.
2. The assessee claimed that the concern was a co-ownership concernbelonging to the two persons above named in the shares already indicated, andas they were residents of Uttar Pradesh at a very long distance from the farmsin Champaran, they appointed on S. K. Kanodia as a common manager for facilityof cultivation and management. This common manager looked after and managed theagricultural operations during the years in question. The further case of theassessee was that the lands were undivided between the co-owners and the totalnet profits arising out of the joint cultivation were divided between the twoco-owners. On these statements the assessee pleaded that s. 13 of the Actapplied and the common manager should have been assessed in respect of theagricultural income-tax payable by each of the two co-owners in respect oftheir shares only. This plea of the assessee was rejected by the Income-taxOfficer. Appeals were then preferred against the assessments made to the DeputyCommissioner of Agricultural Income-tax. These appeals were discussed withcertain modifications with which we are not now concerned. Then, threeapplications in revision were filed to the Board of Revenue. The Board reducedthe assessment under schedule C but did not accept the plea of the assesseethat the assessments should have been made under s. 13 of the Act. The assesseethen moved the Board of Revenue for making a reference to the High Court on thefollowing question of law which it stated arose out of the order of the Board :
'Whether on the facts and circumstances of the casethe common manager is to be assessed. under s. 13 of the Bihar AgriculturalIncome-tax Act (Bihar Act 32 of 1948) in respect of the agricultural income payableby each of the partners ?'
3. It is to be noticed that the underlined words in the question appeared toassume that the concern was a partnership firm. The Board, however, refused tomake a reference.
4. The High Court of Patna was then moved under s. 28(3) of the Act and, itcalled for a reference from the Board on a differently worded question whichexpressed the real issue between the parties :
'Whether in the facts and circumstances of thecase, the common manager should be assessed under section 13 of the BiharAgricultural Income Tax Act in respect of the agricultural income tax payableby the persons jointly liable ?'
5. The question framed by the High Court did not assume that the co-ownersof the concern were partners thereof. Strangely enough when the Board submitteda statement of the case in pursuance of the order of the High Court, it againreverted to the old form of the question. The High Court, however, took thequestion to be the one which it had asked the Board to refer to it and on thatfooting answered it against the assessee. The High Court said that the questionwhether the assessee was a co-ownership concern or a partnership firm was aquestion of fact, and even otherwise, there were facts and circumstances fromwhich it was open to the taxing authorities to come to the conclusion that thefirm was a partnership firm. On this footing the High Court answered thequestion against the assessee.
6. The assessee then moved this court for special leave and having obtainedsuch leave has brought the present appeals to this court from the decision ofthe High Court dated September 29, 1959.
7. We may now refer to some of the provisions of the Act which bear upon thequestion before us. S. 2 of the Act is the definition section. According to thedefinition given in that section 'agricultural income' means interalia any income derived from land which is used for agricultural purposes. Itwas not disputed before us that the income which the assessee in these casesderived was from land which was used for agricultural purposes, namely, thecultivation of sugarcane etc. The definition section further stated that theword 'firm' had the same meaning as in the India Partnership Act,1932, and the word 'person' meant any individual, association ofindividuals owning or holding property for himself or for any other or partlyfor this own benefit and partly for another either as owner, trustee, receiver,common manager, administrator or executor or in any capacity recognised by lawand included an individual, Hindu family, firm or company. The charging sectionis s. 3 which says that agricultural income-tax shall be charged for eachfinancial year in accordance with and subject to the provisions of the Act onthe total agricultural income of the previous year of every person.Agricultural income-tax means the tax payable under the Act. It would appearfrom what we have stated above that by reason of the definition of the words'firm' and 'person' the assessee if it is a partnershipfirm would be liable to tax as a firm on its agricultural income by reason ofthe charging section, namely, s. 3. In s. 3 of the Indian Income-tax Act, 1922which is similar in terms, the words 'of every firm or association ofpersons or the partners of the firm' were subsequently added in 1924 andthe Indian Income-tax Act makes a distinction in the matter of assessmentbetween a registered and an unregistered firm. We are referring to theseprovisions, because at one stage it was argued on behalf of the assessee thats. 13 of the Act which we shall presently quote applied to the present caseseven if the assessee were a partnership firm. Appearing on behalf of theassessee, the learned Solicitor General has, however, conceded before us thathe is not in a position to argue that s. 13 of the Act will apply even if theassessee is a partnership firm.
8. We may now read s. 13 -
'Whether any person holds land, from whichagricultural income is derived, as a common manager appointed under any law forthe time being in force or under any agreement or as receiver, administrator orthe like on behalf of persons jointly interested in such land or in theagricultural income derived therefrom, the aggregate of the sums payable asagricultural income-tax by each person of the agricultural income derived fromsuch land and received by him shall be assessed on such common manager,receiver, administrator or the like, and he shall be deemed to be the assesseein respect of the agricultural income-tax so payable by each such person and shallbe liable to pay the same.'
9. It is quite clear from the section that where a common manager appointedunder any law or under any agreement holds land from which agricultural incomeis derived, on behalf of persons jointly interested in the land or in theagricultural income derived therefrom, the aggregate of the sums payable asagricultural income-tax by each person on the agricultural income derived fromsuch land and received by him shall be assessed on the common manager inrespect of the agricultural income-tax so payable by each such person and thecommon manager shall be liable to pay the same. We have already stated that thelearned Solicitor General has not now argued before us that s. 13 will apply inthe case of a partnership firm. He has however very strongly argued that s. 13in terms will apply if the assessee in the present cases is a co-ownershipconcern (as distinguished from a partnership firm) and the common managerthereof must be assessed in respect of the aggregate of the sums payable asagricultural income-tax by each such co-owner. Mr. S. P. Varma appearing forthe respondent-State of Bihar has indeed conceded that if the assessee in thepresent cases is a co-ownership concern, then s. 13 will apply and the questionreferred to the High Court must be answered in favour of the assessee. He hashowever argued that the High Court was right in holding that the assessee was apartnership firm and on that footing answering the question against theassessee.
10. Thus, the entire controversy before us narrows down to this : on thefacts and circumstances stated in the cases, was the assessee a partnershipfirm or a co-ownership concern We shall presently come to the distinctionbetween these two, but we think that in a question of this sort both form andsubstance must be considered. Now, partnership or no partnership is ordinarilya question of fact, but we agree with learned counsel for the assessee that itis a mixed question of fact and law in the sense that if the authorities who haveto ascertain question of fact apply a wrong principle of law in instructingthemselves as to what they have to find, then their finding of fact is notconclusive because they have done it according to wrong principles (see ModernRigg & Co. and R. B. Eskrigge & Co. v. Monks (1923) 8 T.C. 450, 464.. Looked at from the aforesaid standpoint, the question before the taxingauthorities in the present cases was whether on the facts and circumstancesestablished in the cases in inference of a partnership firm within the meaningof the Indian Partnership Act, 1932 followed and s. 13 was not attractedthereto. That, we take it, must be a question of law. That was the questionwhich was referred to the High Court and the High Court answered it on thefooting that the proper inference was that the assessee was a partnership firmwithin the meaning of the Indian Partnership Act, 1932. The assessee contendsthat the proper inference is that the assessee was a co-ownership concern andnot a partnership firm and on that footing the common manager is entitled to beassessed under s. 13 of the Act.
11. Let us first see what are the facts and circumstances which have beenestablished in the case. First of all, we have the name of the assessee as theChamparan Cane Concern, a name which may apply to a partnership firm as well asto a co-ownership concern. Secondly, the finding of the Deputy Commissioner ofAgricultural Income-tax, a finding which is part of the statement of the case,is that the two co-owners appointed Kanodia as the common manager for facilityof management. Now, the appointment letter showed that the two co-owners joinedtogether in appointing Kanodia as common manager for supervision of cultivationand for management of the agricultural properties in the district of Champaran.'Partnership' within the meaning of the Indian Partnership Act of1932 is a relation between persons who have agreed to share the profits of abusiness carried on by all or any of them acting for all. The appointment of Kanodiaby the two co-owners acting together is consistent with either view and doesnot clinch the issue in favour of a partnership. The High Court appears to havetaken the appointment of Kanodia by the two co-owners as a circumstanceestablishing a partnership. The High Court has further pointed out that the twoco-owners lived in Uttar Pradesh and belonged to two different families. We donot see how that circumstance gives any indication in law of a partnership. Asto division of the profits and losses, the finding of the Deputy Commissionerof Agricultural Income-tax was that the two proprietors had no definite sharesin the agricultural lands, by which he must have meant that the lands of thesix farms had not been partitioned amongst the two co-owners by metes andbounds. The cultivation was made jointly on behalf of the two co-owners by thecommon manager and the profits arising therefrom were distributed to them inproportion of their respective shares of Rs. 0 - 4 - 0 and Rs. 0 - 12 - 0. Thiscircumstance has again been taken by the High Court as a circumstance fromwhich an inference of partnership necessarily follows. Again, we do not agreewith the High Court. Two co-owners may appoint a common manager for facility ofcultivation and management without entering into a partnership and the factthat the profits or even the losses are distributed in accordance with theshares of the two owners does not necessarily establish a partnership withinthe meaning of the Partnership Act, 1932. In Lindley on Partnership (TwelfthEdition pages 57) the main differences between co-ownership and co-partnershiphave been compared. One of the principal differences is that co-ownership isnot necessarily the result of agreement, whereas partnership is. In the casesbefore us there is nothing in the record to show that there was any agreementbetween the two proprietors to form a partnership firm. The second differenceis that co-ownership does not necessarily involve community of profit or ofloss, but partnership does. In the cases before us there is a finding thatthere is community of profit. A third difference is that one co-owner canwithout the consent of the other, transfer his interest etc, to a stranger. Apartner cannot do this. About this point there is no evidence nor any findingthat the two proprietors Padampat Singhania and Bishundayal Jhunjhunwala couldnot transfer their interests in the concern without the consent of each other.The greatest difficulty which faces the respondent in the present cases is thatit cannot point to any fact or circumstance from which it can be inferred thatone proprietor was the agent, real or implied, of the other. In a partnershipeach partner acts for all. In a co-ownership one co-owner is not as such theagent, real or implied, of the other. There is a complete absence of any factor circumstance establishing a relation of agency between the two proprietorsin the present case; nor have the taxing authorities come to any finding thatthere was such a relation.
12. The High Court made a reference to the returns filed on behalf of theassessee for the three years in question as also the frame of the questionwhich the assessee itself wished to be referred to the High Court. As to theframe of the question we have stated earlier that the Board of Revenue reallymade a mistake and it may even be that on behalf of the assessee the questionwas not properly framed. The assessee's contention all along was that it was aco-ownership concern and not a partnership, but in framing the question theword 'partners' was used. We do not think that a mistake in the framing of thequestion, which was later corrected by the High Court, will change the realposition in law. As to the returns which were filed they were not printed inthe paper book. Learned counsel for the respondent gave us copies of thereturns. These returns showed that in all the three years the assesseeindicated its status as a co-ownership concern and the name of the assessee wasshown as the manager, Champaran Cane Concern or common manager, Champaran CaneConcern. The body of the return contained four alternatives as to whether thereturn was being submitted by an individual, a firm, a joint family or anassociation of individuals. The intention of putting four alternatives in the printedform of the return is to cut out the alternatives which do not apply. In thecases before us the alternative relating to individual, family and associationof individuals were cut out and the alternative 'firm' remained. TheHigh Court seems to have thought that the retention of the word 'firm' in thereturn amounted to an admission that the assessee was a partnership firm. We donot agree. In the printed form of the return there was no alternative as to aco-ownership concern and in a popular sense, a co-ownership concern maydescribe itself as a firm. That does not necessarily mean that it is apartnership firm within the meaning of s. 4 of the Indian Partnership Act asindicated in s. 2(k) of the Act. In our view no facts and circumstances have beenfound in these cases from which the taxing authorities properly instructed inlaw could have come to the conclusion that the assessee was a partnership firmwithin the meaning of s. 2(k) of the Act. On the contrary the facts andcircumstances found by the taxing authorities were all consistent with theclaim of the assessee that it was a co-ownership concern the common managerwhereof was liable to assessment under s. 13 of the Act.
13. A number of decisions were cited at the Bar as to the distinction betweenco-ownership and partnership. We have already referred to the main differencesbetween the two. The legal position as to this distinction seems to us to be soclear and well settled that we consider it unnecessary to refer to the case lawon the subject. We do not think that any useful purpose will be served byreferring to the decisions cited at the Bar.
14. For the reasons given above we have come to the conclusion that theanswer which the High Court gave to the question was not correct. Weaccordingly allow the appeals and set aside the judgment and orders of the HighCourt dated September 29, 1959, and answer the question in favour of theassessee. The assessee will be entitled to the costs throughout.
15. Appeals allowed.