Judgment

HEGDE, J. : These companion appeals by certificate under Section 66A (2) of the Indian Income Tax Act, 1922 (in short the Act ) are directed against the decision of the Madras High Court in a tax reference under Section 66 (1) of the Act, relating to the assessment years 1958-59 and 1959-60.

2. Messrs. N. V. Shanmugam and Co., a firm, was carrying on business in the manufacture and sale of snuff under a deed of partnership dated April 20, 1955. Its partners were S. L. Ramiah Nadar, Murugavel Nadar and Shanmughavel Nadar. S. P. Mohan, a minor had been admitted to the benefits of the partnership, his share in the net profits being 1/6th. The deed of partnership provided that the partnership could not be dissolved before August 31, 1955. But it was open to the partners to continue the partnership or enter into a fresh partnership on fresh terms and conditions. On September 17, 1956, Ramiah Nadar filed a suit in the city Civil Court, Madras for the dissolution of the partnership with effect from August 31, 1956 and for taking of accounts. He also applied for the appointment of a receiver to take charge of the business. On September 21, 1956, the Court appointed three receivers two of whom were the partners of the firm namely Ramiah Nadar and Murugavel Nadar and the third was an Advocate by name Ram Mohan. The business of the firm had been stopped from September 1, 1956 to September 21, 1956. The Court directed the receivers "to reopen and conduct the snuff business for the purpose of winding up, with powers to realise the outstandings and discharge the dues of the firm" subject to the following among other terms.

Clause 4 : The receivers can carry on the business of the partnership normally.

Clause 6 : All parties to have access to the books of the firm and to the business premises.

Clause 7 : All parties are entitled to get information relating to the conduct of the business from the receivers.

Clause 8 : The profits if any earned from 1-9-1956 will be treated as an asset of the firm subject to be divided between the parties in the manner set out in paragraph 10 of the deed dated 20-4-1955. The receiver or receivers shall not be entitled to any share in the profits for the management.

Clause 9 : The receivers will pay every month Rs. 1,500/- to plaintiff, Rs. 1,500/- to the 1st defendant, Rs. 750/- to 2nd defendant, Rupees 750/- to 3rd defendant by his guardian from November 1, 1956 (owner of the dissolved firm).

3. Sometimes later the Court appointed a Commissioner for taking the accounts of the firm and for arranging the sale of the business as a going concern; but no sale took place. In the assessment year 1958-59, the business yielded a profit of Rs. 93,739/-. In the assessment year 1959-60, there was a profit of Rs. 1,54,393/-. In response to a notice from the Income-tax Officer, the receivers filed "nil" returns but showed the profits earned in the business in Section D of the return. But they asserted that the income should be assessed in the hands of the beneficiaries as they are already assessees having other sources of income. The Income-tax Officer rejected that contention. He came to the conclusion that the business was carried on by an association of persons and as such no question of assessing the individual partners on their share of income at the rate applicable to them would arise, as contended by the receivers. The Appellate Assistant Commissioner rejected the appeal of the assessees and confirmed the order of the Income-tax Officer; but on a further appeal, the Tribunal came to the conclusion that the profits earned should be assessed to tax in the hands of the individual partners at the rates applicable to them. At the instance of the Commissioner of Income-tax, Madras, the Tribunal submitted the following question under Section 66(1) of the Act for the opinion of the High Court.

"Whether the income of the business in snuff could be assessed on the receivers as an association of persons under Section 10 or