Commissioner of Income Tax vs M.P. Bidi Leaves and Co.

Verma, J.—This is a reference u/s 256(1) of the Income Tax Act, 1961, at the instance of the Department for deciding the following question of law, namely :

"Whether, on the facts and in the circumstances of the case, the assessee-firm was entitled to renewal of registration/registration u/s 184/185 for the year under consideration?"

The assessee-firm was granted registration which was continued till the assessment years 971-72. The Income Tax Officer refused continuance of registration for the assessment years 1972-73 and 1973-74 on his conclusion that the assessee-firm, M/s M.P. Bidi Leaves & Co., Rajnandgaon, was not a separate entity but was merely a branch of another assessee-firm, M/s. C.J. Patel & Co. The Appellate Assistant Commissioner and the Tribunal took a different view on facts and held that the assessee-firm, M/s. M.P. Bidi Leaves & Co., Rajnandgaon, was entirely different from M/s. C.J. Patel and Co. On a reference to this court, this view of the Tribunal was upheld in Commissioner of Income Tax Vs. M.P. Bidi Leaves and Company, . Learned counsel for the Department states that for the assessment year 1974-75 also, the same view was taken by the Tribunal, which was affirmed in a reference by this court.

In this case, we are concerned with the assessment year 1975-76. The assessee-firm was reconstituted on May 1, 1974, as a result of which the seven lady partners therein retired. The present case relates to continuance of registration u/s 184 for the period from April 1, 1974, to April 30, 1974, and fresh registration u/s 185 for the remaining part of the assessment year commencing from May 1, 1974, to March 31, 1975. For this assessment year also the Income Tax Officer rejected the assessee''s contention but the Appellate Assistant Commissioner and the Tribunal have taken a contrary view, as they did for the earlier years. It is on these facts that the above question has been referred by the Tribunal for a decision of this court at the instance of the Department.

The only distinguishing feature on facts for the present purpose is that the seven lady partners of the assessee-firm retired with effect from May 1, 1974, when the firm was reconstituted. In our opinion, the retirement of these lady partners does not in any manner affect the conclusion reached by the Tribunal for the earlier assessment years, when they too were partners. The position remained the same till April 30, 1974, and with the retirement of these lady partners, the case of the assessee-firm for registration became stronger, as one of the factors which weighed with the Income Tax Officer for refusing registration, viz., that several partners were ladies, no longer exists. Moreover, the finding on this question is basically one of fact, as pointed out in the earlier decision of this court in Commissioner of Income Tax Vs. M.P. Bidi Leaves and Company, . Following that decision, this reference also must be answered in favour of the assessee.

Accordingly, the reference is answered in favour of the assessee as follows :

On the facts and in the circumstances of the case, the assessee-firm was entitled to renewal (continuance) of registration/registration u/s 184/185 for the year under consideration.

Costs shall be paid by the Department to the assessee. Counsel''s foe Rs. 200, if certified.