Hardayal Hardy, J.
(1) This order will dispose of two applications viz: I.T.R. No. 16 of 1969 and I.T.R. No. 45 of 1970. I.T.R. No. 16 of 1969 arises out of an order made by the Income-tax Appellate Tribunal (Delhi Bench 'B') and relates to the assessment years 1958-59 and 1959-60, the corresponding accounting years being the period ending on 12th April 1958 and 12th April 1959, respectively. I.T.R. No. 45 of 1970 relates to the assessment year 1960-61, the previous year being the year ending on 12th April 1960 and has been made by the Income-tax Appellate Tribunal (Delhi Bench 'A').
(2) The applicant being the same in both the cases and the question of law being common, both the cases are being disposed of by one order.
(3) The applicant Bhai Sunder Dass and Sons which will hereafter be referred to as the assessed, is a registered firm carrying on the business of running petrol pumps and dealing in accessories. Towards the end of March 1956, a house property at 4/23 B Asaf Ali Road, New Delhi was constructed. For the first two years, the income from the property being exempt under the law, the matter for the assessment of that income arose for the first time in the assessment year 1958-59.
(4) The Income-tax Officer called upon the assessed to explain why the income from that property should not be assessed in its hands. The assessed replied that the income was not taxable in its hands, but should be taxed directly in the hands of the partners constituting the firm. The Income-tax Officer rejected the assessed's contention and treated the house property as being owned by the assessed. The Appellate Assistant Commissioner confirmed the order of the Income-tax Officer.
(5) On appeal before the Income-tax Appellate Tribunal, it was contended that a firm had no existence apart from its partners and consequently it could only be the partners who were the owners of the property even though in the records of rights the property stood in the name of the firm. Under Section 9 of the Income-tax Act 1922, it was only the owner who could be taxed on income from property and thereforee such income had to be assessed in the hands of the partners individually in accordance with sub-section (3) of section 9 of the said Act. The Tribunal rejected the assessed's claim and held that the departmental authorities were right in including the income from the house property at 4/23 B Asaf Ali Road, New Delhi, as income arising to the firm.
(6) The assessed was aggrieved by this order and obtained a reference to this Court under Section 66(1) of the Act on the following question of law:-
'WHETHERon the facts and in the circumstances of the case, the assessed firm was the owner of the house property at No. 4/23 B Asaf Ali Road, New Delhi in terms of section 9 of the Income-tax Act, 1922.'
(7) In the assessment year 1960-61 the same question was considered by another Bench of the Tribunal. The contention urged on behalf of the assessed was that the property in question did nut find a place in the balance sheet of the firm and as such it was not an asset of the firm. It was pointed out that the account of construction was maintained in a separate set of books in the name of Bhai Sunder Dass, one of the partners of the assessed firm and the amount was contributed by him from his own funds. The Tribunal following the earlier decision of Delhi Bench 'B' in respect of the assessment years 19-8-59 and 1959-60, up-held the action oi the departmental authorities in including the bona fide annual value of the property in the income of the assessed; but referred to this court the same question of Jaw as had been referred to in respect of the earlier assessment years.
(8) At the hearing of the case, Mr. Kirpa Ram Bajaj, learned counsel for the assessed invited our attention to certain provisions of the Indian Partnership Act, 1932 and submitted that the assessed firm consists of four partners, namely, Bhai Sunder Dass and his three sons. Actually Bhai Sunder Dass has five sons but the other two sons are not the members of the a.ssessee firm. The plot of land was actually purchased by Bhai Sunder Dass from the Delhi Development Authority although the lease deed was executed in favor of Bhai Sunder Dass and Sons, which is indeed the name of the assessed firm, which is also registered under the Income-tax Act, 1922. The books of account also show that the amount spent on the construction of the property was contributed by Bhai Sunder Dass and did not come out of the coffers of the assessed firm. The property was also not shown in the balance sheet of the assessed firm and was thereforee not an asset of the firm.
(9) It was further argued that under Section 4 of the Partnership Act. a partnership is a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Section 10 requires every partner to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm. The object of constituting a firm thereforee is to carry on business and it is the profits of the business which have to be shared by the partners. The business of the assessed firm admittedly was to run petrol pumps and to deal in accessories and not to own any properties. Under Sec. 14. the property of the firm includes all property and rights and interest in it which was originally brought into the stock of the firm or was acquired by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm. It also includes the goodwill of the business. The scheme of the Partnership Act thereforee is that whatever property is owned by the firm it must have been originally brought into the stock of the firm or if it is acquired by purchase or otherwise after the partnership business has commenced then the property must have been acquired by or for the firm or for the purposes and in the course of the business of the firm.
(10) It was contended that there is no evidence at all that the property in question was originally brought into the assets of the firm or it was subsequently acquired by purchase or otherwise by or for the firm or for the purpose and in the course of the business of the firm.
(11) In support of his argument the learned counsel relied upon a. decision of the Supreme Court in Dulichand Laxminarayan v. Commissioner of Income-tax, Nagpur : 29ITR535(SC) where it was said that the general concept of partnership, formally established in English as well a.s Indian laws, still is that a firm is not an entity or 'person' in law but is merely an association of individuals and the firm name is only a collective name of those individuals who constitute the firm. In other words, a firm made is merely an expression, only a compendious mode of designating persons who have agreed to carry on business in partnership. When a property is thereforee owned by the firm it is actually the partners who own the same for according to the principles of English jurisprudence which we have adopted in this country for the purposes of determining legal rights 'there is no such thing as a firm known to law.' It was thereforee argued that the property at 4/23 B Asaf Ali Road, New Delhi, could not be treated as the property of the assessed firm and is thereforee to be assessed in the hands of the four partners, who were the owners of the property, albeit it was contended that even the other two sons of Bhai Sunder Dass could also be treated as the persons owning the property along with the four partners of the assessed firm.
(12) On behalf of the Revenue, it was contended that the expression 'owner' occurring in Section 9 of the Income-tax Act, 1922 has to be understood for the purposes of assessment to income-tax and not in accordance with the idea that whatever the firm owned or possessed would be deemed to be owned and possessed by the partners constituting the firm. So far as the other two sons of Bhai Sunder Dass are concerned, it was not even the case of the assessed that they had any right, title or interest in the property. The question all along has been whether the property was owned by the assessed firm or by the partners constituting that firm. The other two sons are thereforee completely out of the picture and the case has to be dealt with only on the basis whether the property was owned by the assessed firm or its partners. The question itself suggests that no attempt to widen that question can thereforee be entertained at this stage.
(13) There is substance in this argument of the learned counsel for the Revenue and the case has to be viewed only from the particular angle. namely, whether the assessed firm is the owner of the property in question.
(14) Mr. Sharma, learned counsel for the Revenue also contended that before the Income-tax authorities as well as the Appellate Tribunal the contention urged on behalf of the assessed was whether sub-section (3) of Section 9 had application to the facts of the present case and not in the form in which the question has been placed before this Court by the learned counsel for the assessed. Sub-section (3) of Section 9 reads as under :-
'(3)Where property is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons but the share of each person in the income from the property as computed in accordance with this section shall be included in his total income.'
(15) It was urged that sub-section (3) of S. 9 applies only when a property is owned by two or more persons. It has no application to a property which is owned by one person. According to the Income-tax Act 1922, the firm is a unit of assessment and subject to contract between the partners, S. 14 of the Partnership Act itself provides that it can own properties. Section 9 of the Income-tax Act, 1922 makes the buna fide annual value of the property liable to income-tax in the hands of its owners. If the property thereforee belongs to the firm it is the firm that is liable to pay tax on that property. The partners are no doubt joint owners of the assets of the firm but for the purposes of assessment of income from property that consideration is not at all material. If the property is owned by the firm itself the firm can very well stand as an entity and is distinct from its partners for the purposes of assessment to income-tax. It would by itself be a unit capable of owning property though the exercise of right of ownership might be manifest through its partners. It cannot be said that the firm cannot own property.
(16) The argument of the learned counsel for the assessed that the scheme of the Partnership Act is that the partners should agree to share the profits of a business and that every partner has to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm, does not preclude the firm from owning property. Section 14 of the Partnership Act itself make that position quite clear.
(17) The fact remains that a partnership can own property and the circumstance that the partners have agreed to share the profits of a business is neither here nor there. The main object of the Partnership Act no doubt is the conduct of a business and subject to the provisions of the Partnership Act a partner is the agent of the firm for the purposes of the business of the firm (See S. 18) but the owner-ship of property by the firm is by no means excluded by reason of the fact that the object of the firm is to share the profits of a business. Since taxability of the property owned by a firm is under the provisions of S. 9 of the Income-tax Act, 1922, in an appropriate case, the income from that property may be treated under that Section apart from the business of the firm which is taxable under Section 10 of the Act. That circumstance by no means supports the view of the learned counsel for the assessed that a firm cannot own property and that it has to be taxed in the hands of its partners.
(18) The principle laid down by the Supreme Court in Dullchand's case dealt altogether with a different situation. The question raised in that case was partnership with another firm and it was said. in that context that a firm was not an entity or a person in law, but was merely an association of individuals. The question there was whether a natural or a judicial person alone could become a partner and it was said that since the partnership firm did not have a legal personality it could not become a partner as such. In the case of Commissioner of Income-tax Bengal v. Fiegies and Company and others 34 Itr 405 S. R. Das C.J. who had written the judgment in DuUchand's case was himself a party to the decision in which it was held that the partners are distinct assessable entities from the firm as such. But the latter is itself a separate and distinct unit for purposes of assessment. A reference to sections 26, 48 and 55 of the Income-tax Act, 1922 clearly showed that the technical view of the nature of partnership under English law or Indian law cannot be taken in applying the law of income-tax. The true question to decide is one of entity of the unit assessed and according to S. 3, which is the charging section, a firm is as much a unit of assessment as every individual, Hindu undivided family, company, local authority and other association of persons or the partners of the firm, or the members of the association individually. Section 4 of the Act applies subject to the provisions of the Act, 'to the total income of any previous year of any person' and a partnership firm is one such person in the eye of the income-tax law.
(19) Mr. Bajaj, learned counsel for the assessed, submitted that the word person had not been defined in the Partnership Oct. In Section 2(9) of the Income-tax Act, 1922 only an inclusive definition of the word 'person' has been given. It would however be seen that the General Clauses Act, 1897 provides by Section 3(42) that a. 'person' shall include any company or association or body of individuals whether incorporated or not. The firm is not a company but is certainly an association or body of individuals. Applying that definition to the word 'person' occurring in Section 4, one can at once say that an un-incorporated association,or body of persons, like a firm, is a person. The definition given in Section 3(42) of the General Clauses Act, 1897 however applies only when there is no repugnance in the subject or context. It is difficult to say that there is anything repugnant in the context of Section 4 itself which would exclude the application of that definition to the word 'person' occurring in Section 4.
(20) This aspect of the matter was present before S. R. Das C.J. when he wrote the judgment in Dulichand's case. In fact the learned Chief Justice referred to the case of in re Jai Dayal Madan Gopal : 1ITR186(All) where Sulaiman C.J. was not prepared to dissent from the view that the word 'person' in Section 239 of the Indian Contract Act 1872 should not be interpreted so as to include the firm although he did say that there was nothing repugnent in the definition of 'person' in the General Clauses Act.
(21) It will thus be seen that the word 'person' as considered in Dulichand's case had only a limited application, and that the technical view of the nature of partnership could not be taken in applying the law of Income-tax so far as exigibility of the property owned by a firm was concerned. It has to be treated as the property of the firm and not of its partners.
(22) In Rex v. General Commissioners of Income-tax for the City of London 24 Tax Cas 221 and Latilla v. Commissioners of Inland Revenue 25 Tax Cas 107, it was said by the House of Lords that the technical nature of a partnership under the general law cannot always be taken in applying the law of Income-tax. For some of the purposes of the Act a firm 'is treated a.s an entity distinct from the persons who constitute the firm'. In Y. Narayana Chetty and another v. Income-tax Officer, Nellore, and others 35 Itr 383 it was said by Gajendragadkar J. who wrote the judgment of the Court that the word 'person' used by sub-section (2) of Section 2 of the Income-tax Act, 1922 while defining the assessed, would obviously include ii firm under Section 3(42) of the General Clauses Act since it provides that a person includes 'any company, association or body of individuals whether incorporated or not' and thereforee an assessed under the Act did include a firm and not merely an individual partner. The argument that the assessed was not a person thereforee does not hold good and as sub-section (3) of Section 9 will not apply because the property is not owned by two or more persons.
(23) This brings us to the other contention urged by the learned counsel for the assessed. With reference to Section 14 of the Partnership Act it was argued that this property was not originally brought into the stock of the firm nor is there any evidence to show that it was acquired by purchase or otherwise by or for the firm or for the purposes and in the course of the business of the firm. The balance sheet of the assessed firm showed that the property was not included in the assets of the firm. As such it could not be treated as an asset of the firm and was thereforee not owned by the assessed. The argument is fallacious. Section 14 of the Partnership Act starts with the words 'subject to contract between the partners.' The assessed has not placed on record the original deed of partnership. It has not even stated when this partnership was formed. We thereforee do not know what were the terms of partnership between the partners constituting the firm. When the land in question was purchased it was purchased in the name of the assessed firm although it was contended by the learned counsel that the price of the land was paid by Bhai Sunder Das. We however do not know how far that statement is correct; but the fact that the lease- deed was. executed in the name of the assessed firm itself goes to show that the land was bought by or for the firm. It was also contended that the cost of construction was borne by Bhai Sunder Dass. Apart from the balance sheet there is no other evidence to prove that fact. But assuming that Bhai Sunder Dass bore the cost of construction from his own pocket on a plot of land which was registered in the name of the firm, his object apparently was that the property was purchased for the firm and thereforee became the property of the assessed.
(24) We have already said that no income from this property was assessed in the earlier years and as such its. income was exempt up to 27th March 1958. The fact that for two years the property was treated by the assessed as its own property and exemption was claimed on that account is itself a circumstance that militates against the assertion of the assessed when it was called to explain why the income should not be included in the succeeding year.
(25) The Tribunal also referred to the account maintained in the name of Bhai Sunder Dass and has observed that that account does not show that the other partners were also contributing for the construction in proportion to their shares. A. perusal of the trial balance of the assessed for the assessment year 1960-61 relating to the accounting period 13-4-1959 to 12-4-1960 also showed that it was the assessed who met the expenditure of Rs. 30,860.00 noted in the account on 12-4-1956. This clear indicated that the separte account on construction did not by itself show that the construction was being undertaken by one of the co-owners who is a partner of the assessed firm.
(26) The property admittedly stands in the name of the assessed in the Municipal records. Learned counsel for the assessed stated that under Section 125 of the Delhi Municipal Corporation Act, 1957 a mere entry in the assessment list maintained by the Municipal Corporation is acceptable as conclusive evidence for the purpose of assessing any tax levied under the Act and also with regard to the rateable value of all lands and buildings to which such entries respectively relate. The entries do not thereforee constitute any evidence of ownership. What Section 125 provides for is hat the entries in the assessment list have to be accepted as conclusive evidence of the matters dealt with therein.
(27) The rateable value of the land is one such purpose and is more or less akin to the bona fide annual value of the property under Section 9 of the Income-tax Act, 1922. The evidence is thereforee admissible even if it cannot be treated as conclusive evidence.
(28) Learned counsel for the assessed called our attention to a decision of the Supreme Court in Addanki Narayanappa & another v. Basakara Krishtappa and 13 others : 3SCR400 and stated that if Bhai Sunder Dass wanted the property to be treated as the property of the firm, there should have been a registered deed from him in favor of the firm. No such question arises here as there is no evidence to show that Bhai Sunder Dass was himself the owner of the properly. The case has not application to the facts of the present case. The case relates to the registration of a deed of relinquishment by one of the partners of a partnership firm who relinquished his interest in one of the immovable properties belonging to the firm and the question before the Court was whether an unregistered deed of relinquishment was admissible in evidence. The circumstance that in the present case a registered deed of lease was executed by Delhi Development Authority in favor of the assessed firm itself goes to show that if the property was to be taken out of the firm or if a partner of the firm wanted to relinquish his share in the property there would have been a registered deed of relinquishment. No such question arises in the present case.
(29) On the evidence that was placed before the authorities under the Income-tax Act and accepted by the Tribunal, there could be no doubt that the property belonged to the assessed firm, and was as such assessable in its hands. The question has thereforee to be answered in the affirmative. The assessed will also pay costs of these proceeding. Counsel's fee Rs. 300.00.