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Judgment
Veeraswami, J.—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 a valid 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 u/s 26A of the Income Tax Act, 1922, to the
assessee-firm for the assessment years, 1960-61 and 1962-63, is justified in law ?
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,
Gujarat Vs. A. Abdul Rahim and Co., it was held by this court that the registration of the partnership deed u/s 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.
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.
The question in the two references are answered in favour of the assessees with costs. Counsel''s fee, Rs. 250, one set.