COMMISSIONER OF INCOME TAX V. CHOKSHI ELECTRIC CO.

ITR/34/1995

AI Insights

The case revolves around the cancellation of registration under Section 186 of the Income Tax Act by the Income-tax Officer, which was contested by Chokshi Electric Co. The primary legal question was whether the Appellate Tribunal was correct in law and on facts in setting aside this cancellation, particularly when one of the partners was involved in dual capacities. The legal debate was significantly influenced by the Supreme Court's decision in CIT vs. Kandath Motors, which clarified the legal standing of partnership agreements involving partners in multiple capacities. Both parties acknowledged the applicability of this precedent, leading to the High Court's decision to affirm the Appellate Tribunal's ruling.

• Counselvise Citation: [2001] 140 COUNSELVISE.COM (IT) 718523 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 16-01-2001
• Assessment Year: misc
• Other Referred Cases: CIT vs. Kandath Motors, (1997) 224 ITR 663
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: S N SOPARKAR
• Assessee Lawyers: B B NAIK; MANISH BHATT
• Keywords: Income Tax; Partnership; Registration cancellation; Dual Capacity
• Section: 186

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 34 of 1995 For Approval and Signature: Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus CHOKSHI ELECTRIC CO. -------------------------------------------------------------- Appearance: MR BB NAIK with MR MANISH R BHATT for Petitioner MR SN SOPARKAR for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH Date of decision: 16/01/2001 ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH) In this reference at the instance of the revenue, the following question is referred to us in respect of Assessment Year 1993-94 :- \"Whether the Appellate Tribunal is right in law and on facts in setting aside the order made by the Income-tax Officer cancelling the registration under section 186 of the Act, on the ground that one of the partners was a partner in dual capacity ?\" 2. We have heard Mr BB Naik, learned counsel for the revenue and Mr SN Soparkar, learned counsel for the assessee. The learned counsel agree that the controversy raised herein is concluded by the decision of the Apex Court in CIT vs. Kandath Motors, (1997) 224 ITR 663 wherein the Apex Court has held that a person can be a partner in a partnership firm in his individual capacity and again in another capacity. In the facts of that case, the concerned assessee was a partner in his individual capacity and also as representing the three heirs of a deceased partner. The said assessee had signed partnership agreement in his individual capacity as well as representing heirs of the deceased. The Apex Court has held that there was nothing in the Indian Partnership Act, 1932 or the Indian Contract Act, 1872 which prevented the agreement of this nature and that the validity of the partnership could not be doubted when there were other partners as well. The Apex Court has also held that if the legal representative of the deceased is also one of the surviving partners, he can agree to join the new partnership as a nominee of the legal heirs of the deceased partner. 3. In view of the above decision, we hold that the Appellate Tribunal was right in setting aside the order made by the Income-tax Officer cancelling the registration under Section 186 of the Act on the ground that one of the partners was a partner in dual capacity. We accordingly answer the question in the affirmative i.e. in favour of the assessee and against the revenue. The reference accordingly stands disposed of with no order as to costs. (J.M. Panchal, J.) (M.S. Shah, J.) sundar/- "