HARDAYAL HARDY, J.

( 1 ) THIS order will dispose of two applications viz:. T. R. No. 16 of 1969 and. T. R.

No. 45 of 1970.. T. R. No. 16 of 1969 arises out of an order made by the Incometax

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.. 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 assessee, 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 assessee to explain why the income

from that property should not be assessed in its hands. The assessee 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 assessees

contention and treated the house property as being owned by the assessee. 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

therefore 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 assessees 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 assessee 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:-"whether on

the facts and in the circumstances of the case, the assessee 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 assessee 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 assessee 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 assessee; 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

assessee invited our attention to certain provisions of the Indian Partnership Act,

1932 and submitted that the assessee 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 favour of Bhai Sunder Dass and Sons,

which is indeed the name of the assessee 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 assessee firm. The property was also not shown in

the balance sheet of the assessee firm and was therefore 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 therefore 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 assessee 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 therefore 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

(29 ITR 535) [LQ/SC/1956/16] (1) 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 therefore

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 therefore argued that the property at 4/23 B Asaf Ali Road, New Delhi,

could not be treated as the property of the assessee firm and is therefore 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

assessee 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 assessee that they had

any right, title or interest in the property. The question all along has been whether

the property was owned by the assessee firm or by the partners constituting that

firm. The other two sons are therefore completely out of the picture and the case

has to be dealt with only on the basis whether the property was owned by the

assessee firm or its partners. The question itself suggests that no attempt to widen

that question can therefore 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

assessee 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 assessee 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 assessee. 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 bona fide annual value of the property liable to income-tax in the hands

of its owners. If the property therefore 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 assessee 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

assessee 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 Dullchands 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.. who had written the

judgment in Duuchands 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 assessee, 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.. when he wrote

the judgment in Dulichands case. In fact the learned Chief Justice referred to the

case of in re Jai Dayal Madan Gopal (I ITR 186) where Sulaiman C.. 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 Dulichands 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 Cases 221 (4) and Latilla v. Commissioners of Inland Revenue (25 Tax Cases

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. 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 assessee, 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 therefore an assessee under the Act did include a firm and not merely an

individual partner. The argument that the assessee was not a person therefore 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

assessee. 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 assessee 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 therefore not

owned by the assessee. The argument is fallacious. Section 14 of the Partnership

Act starts with the words "subject to contract between the partners. " The assessee

has not placed on record the original deed of partnership. It has not even stated

when this partnership was formed. We therefore 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 assessee 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 assessee 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 therefore became the property of the assessee.

( 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 assessee as its own property and

exemption was claimed on that account is itself a circumstance that militates against

the assertion of the assessee 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 assessee for the assessment year 1960-61 relating

to the accounting period 13-4-1959 to 12-4-1960 also showed that it was the

assessee who met the expenditure of Rs. 30,860. 00 noted in the account on 12-4-

1956. This clear indicated that the separate 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 assessee firm.

( 26 ) THE property admittedly stands in the name of the assessee in the Municipal

records. Learned counsel for the assessee 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

therefore 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 therefore admissible even if it cannot be treated as conclusive

evidence.

( 28 ) LEARNED counsel for the assessee called our attention to a decision of the

Supreme Court in Addanki Narayanappa and another v. Basakara Krishtappa and 13

others (1966 3 SCR 400 [LQ/SC/1966/28] ) 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 favour 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

favour of the assessee 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 assessee firm, and was as such assessable in its hands. The

question has therefore to be answered in the affirmative. The assessee will also pay

costs of these proceeding. Counsels fee Rs. 300. 00.