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T.K.P.R. Ramanatha Chettiar and Brothers and anr. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case Nos. 99 and 100 of 1965 (Reference Nos. 35 and 36 of 1965)
Judge
Reported in[1969]73ITR811(Mad)
ActsIncome Tax Act, 1922 - Sections 26A; Motor Vehicles Act, 1939 - Sections 42
AppellantT.K.P.R. Ramanatha Chettiar and Brothers and anr.
RespondentCommissioner of Income-tax
Appellant AdvocateK. Srinivasan, ;D.S. Meenakshisundaram and ;K.C. Rajappa, Advs.
Respondent AdvocateV. Balasubrahmanyan and ;J. Jayaraman, Advs.
Cases Referred(See Gurnarayan v. Sheolal Singh
Excerpt:
- - ' 3. the principle of the judgment of the supreme court just referred to would clearly be applicable to the instant references......counsel for the respondent says that at any rate the act does not contemplate persons applying for permits benami. in india benami transactions are recognised and not frowned upon. (see gurnarayan v. sheolal singh, ilr[1919] cal. 566 in commissioner of income-tax v. abdul rahim & co., : [1965]55itr651(sc) it was held by this court that the registration of the partnership deed under section 26a of the indian income-tax act, 1922, cannot be refused on the ground that k was the benamidar of v. we see nothing in the act which expressly or by implication bars benami transactions or persons owning buses benami and applying for permits on that basis.' 3. the principle of the judgment of the supreme court just referred to would clearly be applicable to the instant references. though the firm.....
Judgment:

Veeraswami, J.

1. The two references pertain to the assessment years 1960-61 and 1962-63. The Tribunal has found that the assessee-firm plied three lorries daring the first year and two lorries during the second which they owned but with their permits not transferred to them but continuing to stand in the names of the original owners. Upon those facts, the Tribunal was of opinion, agreeing with the Commissioner of Income-tax, that inasmuch as the firm operated the lorries without valid permits which was prohibited by Section 42 of the Motor Vehicles Act, the firm engaged itself in an unlawful activity, namely, the running of the lorries without avalid permit. Oh that view the registration of the firm which was granted by the Income-tax Officer and subsequently renewed by him stood cancelled! The common question in this reference is :

'Whether, on the facts and in the circumstances of the case, the refusal of renewal of registration under Section 26A of the Income-tax Act, 1922, to the assessee-firm for the assessment years, 1960-61 and 1962-63, is justified in law '

2. Our attention has been invited to an unreported judgment of the Supreme Court in Civil Appeal No. 1453 of 1966, [1969] 1 M.L.J. (S.C.) 86, and it is contended that, in view of it, the Tribunal's order can no longer be sustained. In that case, which went to the Supreme Court, the view taken by this High Court in Viswanathan v. Shanmugham, [1966] 1 M.L.J. 363 was that a benamidar of certain motor vehicles, representing himself to be the owner, falsely obtained the permits in his name and allowed the true owner, who had no permit, to conduct the actual business and this was a flagrant violation of the basic requirements of the Motor Vehicles Act and of its scheme. The Supreme Court did not accept that view and considered that Varadarajulu Naidu v. Thavasi Nadar, [1963] 2 M.L.J. 20 was wrongly decided. The decision of the Andhra High Court in Chavali Venkataswami v. Chavali Kotayya, [1959] 2 A.W.R. 407 which had taken a view similar to the one in Viswanathan v. Shanmugham, was also dissented from. The Supreme Court, in doing so, observed :

'The learned counsel for the respondent says that at any rate the Act does not contemplate persons applying for permits benami. In India benami transactions are recognised and not frowned upon. (See Gurnarayan v. Sheolal Singh, ILR[1919] Cal. 566 In Commissioner of Income-tax v. Abdul Rahim & Co., : [1965]55ITR651(SC) it was held by this court that the registration of the partnership deed under Section 26A of the Indian Income-tax Act, 1922, cannot be refused on the ground that K was the benamidar of V.

We see nothing in the Act which expressly or by implication bars benami transactions or persons owning buses benami and applying for permits on that basis.'

3. The principle of the judgment of the Supreme Court just referred to would clearly be applicable to the instant references. Though the firm was the owner of the lorries and operating them, the partnership cannot be regarded as illegal merely because the permits in regard to them stood in the names of their original owners. That conclusion is inescapable in view of the decision of the Supreme Court in the civil appeal.

4. The question in the two references are answered in favour of the assessees with costs. Counsel's fee, Rs. 250, one set.


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