GENTLE J. - This is an application by the Commissioner of Income-tax, Bengal, for an order calling upon the Income-tax Appellate Tribunal to state a case on questions of law with respect to its order relating to an assessment for the year 1938-39 made upon Khan Bahadur Waliur Rahman of Jalpaiguri. On the 17th January, 1944, this court issued a rule nisi calling upon the Tribunal to show cause why a case should not be stated and this is the hearing of the rule which was served not only on the Tribunal but also on the assessee. Since the issue of this application the assessee had died and his sons and daughters have been brought on the record as his legal representatives. No point arises out of this.
It is convenient first to state the relevant facts. The assessee and his wife, Begum Manija Khatun, are each possessed of separate properties, the wifes property was in no way derived from her husband and she obtained if from other sources. Each of them is the proprietor of lands, portions of which are adjacent to each other. Having obtained the necessary permits from the Government, the assessee and his wife commenced to grow tea upon lands belonging to each of them, adjacent to one anothers property. In order to put the crop into a marketable state, a tea factory was purchased and other arrangements were made to make and sell tea, the husband and the wife each finding a sum for those purposes. After manufacture the tea is sold and the proceeds, or more correctly, the profits of the proceeds, are equally divided between the assessee and his wife. With regard to the management of the wifes interest in the growing of the crop, its manufacture and sale, the husband holds, together with eight other persons, power-of-attorney from the wife enabling him and the others to deal with matters which require attention with respect to those arrangements. It is no part of the applicants case than the separate pieces of adjacent lands belonging to the husband and the wife ever ceased to be other than their respective separate properties.
The undertaking, as I will call it, with regard to the manufacture and sale of tea, is known as the Rheabari Tea Estate and, so far as it is material, up to the year of assessment 1938-39, the profits from that undertaking were assessed as upon an association of individuals. In respect of the year under consideration the Income-tax Officer considered that the husband and the wife were partners together in the Rheabari Tea Estate. Consequently, he applied the provisions of Section 16(3)(a)(i) of the Income-tax Act which reads as follows :-
'In computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of a wife as arises directly or indirectly from the membership of the wife from the membership of the wife in a firm of which her husband is a partner.'
The Rheabari Tea Estate was treated as a partnership and the result of the new method of assessment was to include in the husbands income-tax assessment that part of the profits from the Rheabari Tea Estate as were considered to belong to the wife, and for the purpose of assessment that income was treated as part of the husbands income.
In making his assessment the Income-tax Officer applied the provisions of rule 24 of the Indian Income-tax Rules, as then in force which are as follows :-
'Income derived from the sale of tea grown and manufactured by the seller in British India shall be computed as if it were income derived from business, and 40 percent of such income shall be deemed to be income, profits and gains liable to tax.'
It will be noticed that this rule is applicable only in respect of a seller who manufactures tea which he has himself grown and which he himself sells. It is no part of the case of the Commissioner that the two pieces of land belonging to the husband and the wife are parts of the assets of a partnership or that the crops grown on the lands are such assets but the crops become part of the assets when plucked or when delivered into the tea factory for manufacture. That being the position, it does not seem, whatever other considerations there may be, that rule 24 should be applicable inasmuch as the tea, which the alleged partnership manufactures and sells, is not tea which is grown by that partnership. The substance of the assessment made by the Income-tax Officer should be, since rule 24 has been applied, that the partnership grew the crop from which tea was manufactured.
The assessee appealed against the application of Section 16(3)(a)(i) and the inclusion in his assessment of his wifes share from the profits of the Tea Estate to the Appellate Assistant Commissioner who dismissed that appeal. He further appealed to the Income-tax Appellate Tribunal. That body allowed the appeal holding that there was no partnership between the husband and the wife with respect to the tea estate.
Being dissatisfied with its decision the Commissioner applied to the Tribunal to state a case upon questions which he formulated. The Tribunal by its order held that no point of law arose for the opinion of this Court and refused to state a case. The present application is made under the provisions of Section 66 of the Act to require the Tribunal to state a case.
There were two questions which the Commissioner sought to raise and in respect of which he applied to the Tribunal to state a case. They are as follows :-
'(1) Whether there were any materials on which the Tribunal could come to the finding recorded in paragraphs 3, 4 and 5 of their order, and
(2) Whether on the admitted facts and circumstances of the case the Tribunal directed themselves correctly in holding that there was in law no partnership between the assessee and his wife and Section 16(3)(a)(i) of the Income-tax Act did not apply.'
Dr. Gupta, learned counsel for the Commissioner, at the commencement of his argument, formulated two question which, if I may say so, more succinctly and correctly would set out the contention which he sought to establish in his argument, but I do not think, save for the method of expression, there was any alteration in the substance of the questions which the Tribunal was asked to state and which it refused to do.
Before I deal with other matters reference to some of the provisions of Section 6 of the Partnership Act is convenient. They are as follows :-
'In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.
Explanation 1. - The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.'
I refer to the above provision because it is not, as the enactment declares, a necessary corollary that because two persons share the profits arising out of the same property these persons are in partnership together with respect to it.
I have set out the facts and circumstances which have appeared in this reference. From those facts it was open to the Tribunal to decide, aye or nay, whether the husband and the wife were partners in the Rheabari Tea Estate. The Tribunal has decided that there was no partnership. Whether that decision is correct or whether it is incorrect, to my mind, is not a matter with which we are concerned. It was open to the Tribunal to express a finding one way or the other and it has done so. Question (1) is whether there were any 'materials' which I can read only as 'evidence,' on which the Tribunal could come to its finding. In my opinion, there was evidence, and that being so, it is not for this Court to correct any error which there may be, but which I do not say there is, in the conclusion to which the Tribunal arrived. In the way in which the question appears to be framed and using the word 'evidence' instead of materials, it would seem that what was sought to be raised is whether there was any evidence on which the Tribunal could find that there was no partnership. However, that is a matter which needs no further reference.
Now as to the second question. It relates to admitted facts and circums-tances. The question suggests that upon those admitted facts the Tribunal should have come to the conclusion that there was a partnership. It is conceded that the words 'admitted facts' include statements which are alleged to be contained in a written document dated the 26th February, 1938, in which the assessee set out certain matters which he sent to the Department. What the document contains I do not know; it was not placed before the Tribunal, from which one can only infer that reference to it was not made at the hearing before that body. There is no express reference to it in the order of the Appellate Assistant Commissioner. Dr. Gupta referred us to a passage in the Appellate Assistant Commissioners order which, he says, came from that statement, but there is nothing in the order itself which in any way suggests that any part of it, whatever it contained, is cited by the Appellate Assistant Commissioner; with respect to the second question the so-called admitted facts, alleged to be containedin the assessees document, were not before the Tribunal inasmuch as the document in which those facts are alleged to be contained was never placed before them.
In my opinion this rule nisi should be discharged. The assessee is entitled to his costs assessed at 12 gold mohurs.
ORMOND, J. - I agree.
Rule nisi discharged.