1964 SCR (2) 921
(co-ownership vis-a-vis partnership )
The appellants, living in far off place of U.P appointed a common manager for facility of cultivation and management of land in Champaran (Bihar).The concern was assessed as a partnership firm for all the three years, though the assessee claimed that it was a co-ownership concern. The further argument of the assessee was that the lands were undivided between the co-owners and the total net profits arising out of the joint cultivation were divided between the two co-owners. On these statements the assessee pleaded that s. 13 of the Act (Bihar Agricultural Income-tax Act) applied and the common manager should have been assessed in respect of the agricultural income-tax payable by them. This plea of the assessee was rejected by the Income-tax Officer.
From the beginning to the HC, the order was passed against the assessee and the firm was held as partnership firm.
HC concluded the firm to be a partnership firm on the facts-
I. Two co-owners joined together in appointing the common manager.
II. The cultivation was made jointly on behalf of the two co-owners by the common manager and the profits arising there from were distributed to them in proportion of their respective shares.
Appellant Conceded: s. 13 of the Act will not apply even if the assessee is a partnership firm.S. 13 in terms will apply if the assessee in the present cases is a co-ownership concern.
Respondent Conceded: If the concern is really a co-ownership, then the s.13 will be applicable and this will favour the assessee
Issue: Was the assessee a partnership firm or a co-ownership concern?
The HC erred in deciding the concern as partnership firm on the Facts I & ii. Two co-owners may appoint a common manager for facility of cultivation and management without entering into a partnership and the fact that the profits or even the losses are distributed in accordance with the shares of the two owners does not necessarily establish a partnership within the meaning of the Partnership Act, 1932. Law Point (Lindley on Partnership)
- Co-ownership is not necessarily the result of agreement, whereas partnership is. (Lack of agreement in this case)
- Co-ownership does not necessarily involve community of profit or of loss, but partnership does. (Community of profit in this case)
- One co-owner can without the consent of the other, transfer his interest etc, to a stranger. A partner cannot do this. (No evidence, in this case, as to, two partners could not transfer their interests in the concern without the consent of each other)
- In a co-ownership one co-owner is not as such the agent, real or implied, of the other. (respondents failed to establish mutual agency in this case)
Assessee is a co-ownership, s.13 applicable, appellants not liable to pay but the manager.
 “Whether any person holds land, from which agricultural income is derived, as a common manager appointed under any law for the time being in force or under any agreement or as receiver, administrator or the like on behalf of persons jointly interested in such land or in the agricultural income derived therefrom, the aggregate of the sums payable as agricultural income-tax by each person of the agricultural income derived from such land and received by him shall be assessed on such common manager, receiver, administrator or the like, and he shall be deemed to be the assessee in respect of the agricultural income-tax so payable by each such person and shall be liable to pay the same.”