Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.
Champaran Cane Concern v. State of Bihar and Anr.
AIR 1963 SC 1737: 1964 SCR (2) 921
JUDGES: S.K. Das, A.K. Sarkar and M. Hidayatullah
Date of Decision: 09-04-1963
FACTS:
The Champaran Cane Concern (Appellant) carried on agricultural operations on lands owned by two persons. They appointed another person as a common manager for facility of cultivation and management. There was no partnership agreement entered into by these two persons. The assessment of the appellant was done by the Income Tax Authorities as a “partnership firm” for all the three years but it claimed to be co-ownership concern. Plea was rejected and hence the present matter.
ISSUE:
Whether the assessee is a co-ownership concern or a partnership firm?
JUDGMENT:
The Hon’ble Supreme Court noted that the High Court erred in deciding the Concern as a Partnership firm on two facts, i.e., firstly that the two co-owners joined together to appoint a common manager and secondly, that the cultivation was made jointly on behalf of two co-owners by the common manager and the profits arising from there were distributed amongst them in proportion to their share. But the Supreme Court pointed out certain differences between a partnership firm and a co-ownership which were:
- Partnership is the result of agreement whereas Co-ownership is not the result of an agreement.
- Partnership involves the community of profit or loss whereas Co-ownership does not.
- A partner cannot transfer his interests to a stranger without the consent of the other partner whereas a co-owner can transfer it.
- A partner can be the agent, real or implied, of the other but a co-owner cannot be such agent.
The Court, from the aforementioned differences, finds that there is lack of agreement in this case between the two joint-owners and there is an existence of community of profit and also there is no evidence exists regarding the transfer of interests by the two proprietors.
HELD:
The Supreme Court held that the assesse is a Co-ownership concern. The Judgment and Orders of the High Court was set aside and assesse was entitled to costs throughout. Appeal was allowed.
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