M. C. AGARWAL, J. M.: All these appeals raise common question and will, therefore, be decided b y this common order. assessees in both these sets of appeals were represented by same counsel, viz., Shri A. L. Jain, chartered accountant, and Shri B. B. Khare, advocate. Ghasiram Kaluram, appellant in first set of appeals, is registered firm and was carrying on arhat business at Daulatganj, Ujjain, for long before asst. yr. 1976-77. Madhya Pradesh Krishi Upaj Mandi Adhiniyam, 1972, provided establishment of market areas and constitution of mandi committees for their management. One of objectx of this legislation, as it was contended before us, was to protect interests of farmers by creating machinery through which they got fair price for their produce without unauthorised deductions. In pursuance of provisions of that Act, mandi committee was constituted at Daulatganj, Ujjain, as well. It was contended that in order to give effect to provisions of said Act, mandi committee had decided that pucca arhatia would not carry on business of kutcha arhatia and kutcha arhatia had to be separately licensed. functioning of kutcha arhatias was authorised from 27th Jan., 1975 and kutcha arhatia association passed resolution on 25th Jan., 1975 that business as kutcha arhatia would start from 27th Jan., 1975 and every member of kutcha arhat association should make necessary arrangements. In pursuance of this, new firm, Oswal Trading Co. was created. old firm, Ghasiram Kaluram, consisted of four partners, viz., Smt. Chandbai, Manekal, Rajendrakumar and Subhashchand. All three male partners are real brothers and Smt. Chandbai is their mother. new firm, Oswal Trading Co. (the appellant in other set of appeals), was created w.e.f. 27th Jan., 1975 and consisted of three partners, n m e l y , Subhashchand, Smt. Premkumari and Smt. Kusumkumari. Subhashchand is one of partners in old firm, Ghasiram Kaluram, and Smt. Premkumari and Kusumkumari are wives of other two partners of Ghasiram, Kaluram, namely, Manekal and Rajendrakumar, respectively. application for registration of new firm was moved for first assessment year, i.e., 1976-77, accounting year for which ended on Diwali 1975. During course of enquiry, survey was also conducted at business premises of firm and after enquiry, ITO held that Oswal Trading Co., was not genuine firm and its business was actually carried out by Ghasiram Kaluram. ITO, therefore, refused registration to Oswal Trading Co. by order dt. 28th March, 1979 and further ordered that its income will be included in income of Ghasiram Kaluram and in alternative as protective measure, Oswal Trading Co. shall be assessed as AOP as well. Consequently, its assessments for various years were completed resulting in aforesaid appeals by two sets of assessees. first set of four appeals is by Ghasiram Kaluram for asst. yrs. 1976- 77, 1977-78, 1979-80 and 1980-81, respectively, It has objected to inclusion of income of Oswal Trading Co., in its income and has also objected to disallowance of salary paid to its partners. Interest paid by Ghasiram Kaluram to Oswal Trading Co. was also disallowed on ground that it was interest paid to itself and this is also in dispute in some of these appeals. IT Appeal No. 59 of 1983 is appeal by Oswal Trading Co. against refusal of registration vide order passed under s. 185(1)(b) of IT Act, 1961 ('the Act ). There is no separate quantum appeal against assessment under s. 143(3) of Act. However, in grounds of appeal, disallowance of salary paid to Maneklal and Rajendrakumar, partners in Ghasiram Kaluram and husbands of two ladies, who purport to be partners in Oswal Trading Co., has also been challenged. other appeals are for asst. yrs. 1977-78, 1978-79, 1979-80 and 1980-81, respectively, against assessment under s. 143(3) challenging action of ITO in treating assessee as AOP. other grounds raised in these appeals are regarding aforesaid salary payments and payment of interest to Smt. Chandbai. Since there was no specific order refusing continuation of registration, there are no separate appeals in that regard. We have heard ld. counsel for appellants, and ld. departmental representative and have given our careful consideration to issues involved. main issue in this case is whether firm, Oswal Trading Co., was independent firm and not merely another name of Ghasiram Kaluram and even if it was separate firm, whether it was genuine firm and whether it should have been registered by ITO? other grounds, as mentioned above, are merely consequential and their decision would depend upon result of main controversy. In holding that firm, Oswal Trading Co. is not genuine firm and is only another name adopted by Ghasiram Kaluram for carrying on part of its business, ITO relied upon following circumstances: (1) that same persons were beneficially interested in both firms; (2) that business of both firms was same; (3) that finances and management of both firms were common; (4) that business premises of both so-called firms were common; and (5) that there were common accounts. Except facts that two firms had not separate business premises and were carrying on business in same premises belonging to HUF of aforesaid brothers, all he circumstances were challenged by ld. counsel for appellants in these appeals before us We will now deal with them. As has already been stated, all partners of Ghasiram Kaluram belong t o one family. They are three real brothers and their mother. other firm, O s w l Trading Co., purports to consist of one of brothers, namely, Subhashchand and wives of two other brothers. two other brothers, namely, Rajendrakumar and Maneklal purport to have been employed by Oswal Trading Co., for carrying on its business. It was admitted that so far as female members of both firms are concerned, they were simply sleeping partners and had no concern with actual carrying out of day-to-day business. result, therefore, is that same three persons who are real brothers are actually managing business of both firms. This is not in dispute at all. Smt. Premkumari and Kusumkumari are said to have invested sum of Rs. 5,000 each in Oswal Trading Co., while financial requirements of so-called firm were much more. copy of personal account of these two ladies in accounts of Oswal Trading Co. was furnished in paper book which shows that, apart from purported initial investment of Rs. 5,000, these ladies did not contribute any further money. On other hand, Subhashchand purports to have withdrawn Rs. 50,000 on 28th Jan., 1975 and Rs. 25,000 on 31st Jan., 1975 from Ghasiram Kaluram and invested in Oswal Trading Co., not only this, about Rs. 1,68,000 purport to have been advanced by old firm to new firm to provide for its financial requirements. copy of account of Oswal Trading Co. in books of Ghasiram Kaluram is at p. 24 of paper book and it shows that on 28th Jan., 1975, it advanced sum of Rs. 10,000 to new firm and during accounting year relevant to asst. yr. 1976-77, there were other total advances amounting to Rs. 8,76,408 and at end of year, there was debit balance of Rs. 87,568. These facts clearly show that new firm Oswal Trading Co., was totally dependent for its finances on old firm, Ghasiram, Kaluram. No attempt was made on behalf of present appellants to show that Oswal Trading Co., raised funds from other sources as well, and these advances were not financial accommodations but were on account of regular trade dealings as would happen between two independent concerns dealing with each other. As already stated, it is admitted that ladies are not taking any active interest in business of firm and are so-called sleeping partners. It was not even asserted that two ladies, Premkumari and Kusumkumari wanted to start arhat business and, therefore they entered into partnership with Subhashchand for purpose. No initiative was alleged or shown to have come from these ladies, who, at most, appeared to have lent their names at instance of their husbands. Why firm in name of Oswal Trading Co., was put up is very relevant and that given us clue about real nature of this so- called independent firm. It was vehemently contended before us on behalf of appellants that after establishment of market committee under Madhya Pradesh Krishi Upaj Mandi Adhiniyam, pucca arhatia could not work as kutcha arhatia and, therefore, in face of that situation only option before firm, Ghasiram Kaluram, was either to close down that line of business or to indulge in illegal transactions of contravention of provisions of Act and that since is could not do either of two things, new firm was set up to work as kutcha arhatia, while that part of business which related to pucca arhatia could be continued by Ghasiram Kaluram. Thus, it is not necessity of ladies that brought about this new name into existence. On other hand, it was need of partners of Ghasiram Kaluram to continue their business that they had to pick up new mask in name of Oswal Trading Co. As already observed, it is also admitted that business in both names is being conducted by same persons, that is three brothers. All them are partners in Ghasiram Kaluram. As regards Oswal Trading Co., Subhashchand purports to be full-fledged partner while other two brothers have been engaged as employees. fact remains that entire business and its management is in hands of same persons. ITO had examined Subhashchand on 10th Jan., 1978 and some of answers given by him to questions addressed by ITO are important. In answer to question Nos. 15 and 16 regarding flow of money from one firm to other, Subhashchand impliedly admitted it to be so. At hearing before us, it was contended that Ghasiram Kaluram did not do kutcha arhat business. This, however, is disproved from material on record. In answer to question No. 18, Subhashchand did not deny that Ghasiram Kaluram was doing kutcha arhat business. When asked to explain whether there was any difference in two types of arhat for purposes of accounting or for purposes of sales tax, he said that there was no such difference. Question Nos. 20 and 21 and their answers are important and are, therefore, reproduced below: "Q. 20: Which means that business which Oswal Trading Co. is doing now was part of Ghasiram Kaluram before asst. yr. 1976-77. What you have to say? Ans.: This was done by Ghasiram Kaluram previously and is also being done today. Q. 21: Which means that business that you call kutcha arhat is also being done by Ghasiram Kaluram today? Ans: Yes, it was done by Ghasiram Kaluram previously and also being dome today." next day, i.e., 11th Jan., 1978, ITO conducted survey at premises of these firms and found that cash was only at one place. There were no separate business premises and transactions were initially noted in common book and were ledgerised in separate books later on. ITO recorded statement of Maneklal as well and after sustained questioning, Maneklal had to admit that there was no separate cash box for Oswal Trading Co. Earlier, he had tried to pretend that cash box and accounts of Oswal Trading Co. were in another almirah kept nearby. When that almirah was opened, it contained some old and miscellaneous papers and registers of both firms and some personal papers about life insurance, etc. On opening that almirah further showed that it was not in regular use. Although day earlier Subhashchand had stated that Ghasiram Kaluram was doing kutcha arhat business as well, Maneklal contradicted it and said that Ghasiram Kaluram did only pucca arhat business. As was vehemently contended before us, necessity for floating new firm arose because same persons could not do kutcha arhat as well as pucca arhat business. If Ghasiram Kaluram was not doing kutcha arhat business earlier, there was nothing for them to worry by new regulations as they would not affect them in any manner whatsoever. fact that they were worried and argument that only option for firm was either to close down branch of its business or bring about new entity for carrying on kutcha arhat business, itself indicates and proves beyond doubt that Ghasiram Kaluram was doing kutcha arhat business as well and it is this business of Ghasiram Kaluram which is being done in name of Oswal Trading Co. after enforcement of certain regulations under aforesaid Act. Thus, Ghasiram Kaluram started doing its kutcha arhat business in new name, Oswal Trading Co. It was contended that Subhashchand s statement about nature of t w o business was confused. Such argument cannot be accepted. appellants had ample opportunity to prove that in fact Ghasiram Kaluram was doing only pucca arhat business and had no interest in kutcha arhat business done in name of Oswal Trading Co. We find that appellants business done in name of Oswal Trading Co. We find that appellants made no effort whatsoever to rebut evidence collected by ITO. statement made by person cannot be treated as confused statement merely because it is contended to be so. It was also argued that interest amounting to Rs. 1,600 was paid by Ghasiram Kaluram to Oswal Trading Co., which reflected genuineness of latter firm and its independent character. This is not so. It can be mere accounting exercise and it is patently so. Any person who puts up show creates certain circumstances to give appearance natural tenor and entries of interest in accounts are only attempt in that direction. From above discussion, it is clear that finding, of authorities below that same persons were beneficially interested in two firms, that same persons conducted and controlled business, that finances were common, that business premises were same and initial entries were made in common account books are based on cogent, direct and circumstantial evidence and ld. counsel for appellants have failed to dislodge these findings. They, are, accordingly, confirmed. Now we proceed to look to certain authorities dealing with situations like this. In case of Setabganj Sugar Mills Ltd. vs. CIT (1961) 41 ITR 272 (SC), it was observed by Hon ble Supreme Court of India that in order to find whether two different ventures can be said to constitute same business, one has to look to things such as unity of control and management, conduct of business through same agency, inter-relation of business, employment of same staff to run business and nature of different transactions. If we look at facts of present case in light of observations in this ruling, we find that there is unity of control and management in two appellants. business of both appellants is being carried on through same persons, finances are interlocked and nature of business is supplementary to each other. In other words, they are two limbs of same business. In Dhanji Lalji vs. CIT (1977) 107 ITR 395 (Bom), one DL was doing business as sole proprietor with two of his relations as his servants. business was converted into partnership purporting to take two servants as partners. On circumstances on case, it was held that no genuine partnership had come into existence. It was observed that each one of circumstances taken by itself might not be sufficient to lead to inference about non-genuineness of firm but that did not mean that taking all circumstances and factors cumulatively such inference can never be drawn. In case before us also, various circumstances found above, as matters of fact, when considered cumulatively, lead to only one and irresistible conclusion that Oswal Trading Co., is nothing but new name adopted by Ghasiram Kaluram in order to regularise its kutcha arhat business. In Ladhu Ram Taparia vs. CIT (1962) 44 ITR 521 (SC), ITO, on investigation, found that number of firms carrying on business under different firm names really belonged to one and same group of persons. Hon ble Supreme Court held that ITO could refuse to register those firms under s. 26A of Indian IT Act, 1922 ( 1922 Act ). It was observed that IT authorities are not bound to register firm merely because firm has been registered as such under Indian Partnership Act, 1932. In CIT vs. G. Parthasarathy Naidy & Sons (1980) 14 CTR (AP) 334 (FB): (1980) 121 ITR 97 (AP) (FB), there were two firms with same partners, though with difference in ratio of sharing profits. two firms carried on different businesses and it was held that two firms genuine. Great reliance was placed on behalf of appellants on this ruling, which, however, does not help appellants in any manner whatsoever. question has to be decided on cumulative effect or totality of all material factors relating to object and intendment of partners in business, their nature, character and identity, coupled with factum or otherwise of interlacing and interlocking funds between two firms. Nothing of sort was found in that case, while in case before us all circumstances are against assessee. There could have been some force in arguments of ld. counsel if all three brothers were partners in new firm. Instead of doing so, they, however, brought in two ladies as banamidars. As already found, nature of business is same and it is being conducted as one and same business with common funds, common business premises, common management and control and even same common account books. case somewhat identical to facts of case before us came up before Hon ble Madras High Court in CIT vs. S.S.A.M. Shammugha Nadar Financing Corpn. (1983) 141 ITR 656 (Mad). In that case, there were nine partners of firm. One of those partners, along with wives of other eight partners, entered into partnership and constituted financing corporation B. eight ladies withdrew Rs. 1,16,309 from amounts standing to their credit in old firm, while M, male partner, withdrew Rs. 5,000 and invested in new firm. Other amounts were also withdrawn and invested in new firm from old one and entries were made by mere book adjustments and no cash actually passed. It was held that new firm was not genuine firm. It was observed that execution of partnership deed is not by itself talisman which can entitle firm to be registered as, apart from execution of partnership deed, there must be circumstances and facts to show that it had come into existence and that it had carried on business. mere fact, therefore, that separate partnership deed was executed in case before us between Subhashchand and two ladies, does not provide any great advantage to appellants and we have to look to totality of circumstances. In view of above discussion, we agree with findings recorded by authorities below that firm. Oswal Trading Co., was not genuine firm and it was merely alias of Ghasiram Kaluram adopted for meeting legal requirements under Madhya Pradesh Krishi Upaj Mandi Adhiniyam. authorities below, were, therefore, right in holding that business in name of Oswal Trading Co. was actually carried on by Ghasiram Kaluram and, therefore, it was not independent unit and its income was to be taxed in hands of Ghasiram Kaluram. Registration was, accordingly, rightly refused to Oswal Trading Co., because in view of its character it was not genuine firm and in any case this business was merely benami for all partners of Ghasiram Kaluram or at least two ladies were banamidars of their respective husbands. Having covered above ground, we now come to question of disallowances of salary and interest. In asst. yr. 1976-77, payment of Rs. 18,00 as salary to Maneklal and Rajendrakumar, partners, and payment of Rs. 1,600 to Oswal Trading Co. as interest have been disallowed. Salary paid to partner is not business expenditure and interest paid to Oswal Trading Co. was fictitious thing as it amounted to paying interest on its own capital. These was fictitious thing as it amounted to paying interest on its own capital. These so-called expenses debited to P & L a/c were, therefore, rightly disallowed. For same reason, sum of Rs. 6,353 paid to Oswal Trading Co., as interest during asst. yr. 1977-78 was rightly disallowed. Salary amounting to Rs. 8,100, Rs. 10,000 and Rs. 10,800 pertaining to asst. yrs. 1976-77, 1977-78 and 1978-79 wad disallowed in case of Oswal Trading Co. These were amounts paid to Maneklal and Rajendrakumar. In view of finding that business in name of Oswal Trading Co. was business of Ghasiram Kaluram itself of whom aforesaid persons were partners, these payments could not be allowed as business expenditure. Similarly, interest paid to Smt. Chandbai (Rs. 687 in asst. yr. 1977-78 and Rs. 915 in asst. yr. 1978-79) could not be allowed as business expenditure, being interest paid to one of partners. In view of above findings, all these appeals fail and are hereby dismissed. *** GHASIRAM KALURAM v. INCOME TAX OFFICER