| 9/9/2010 |
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| Board of Special Commissioners - Cases |
| Case No. 19/51 |
Decided: 17 January, 1953 |
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Existence of partnership between appellant and his son; the fact that there was no partnership agreement did not mean that no partnership existed - article 49, now 27, Income Tax Management Act; articles 1738 and 1760 Civil Code
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Appellant maintained that his business was being carried on in partnership with his son, therefore the profits derived therefrom were to be divided between the two of them. There was no partnership agreement but both had contributed equipment towards the business; rent was paid by appellant but the two of them withdrew cash from the business. From the profits made, they had purchased machinery that was used in the business. Appellant's son had never featured as an employee.
The Commissioner contended that there did not exist a partnership because:
- there was no partnership agreement in 1948; it was drawn up only after he had refused the assessment (the Board held that the non-existence of the agreement did not necessarily exclude the existence of a partnership);
- there was no agreement regarding the distribution of profits (but the Board noted that both had withdrawn equal amounts and the workshop had been equipped out of profits derived from the business);
- no proof had been produced that the 1948 profits were actually distributed between the supposed partners (the Board held that the fact that no records had been held did not necessarily mean that the partners' claim was not true);
- the workshop and the bank account were in appellant's name (the Board held that it was understandable that appellant wished to keep a certain amount of control).
The Board held that appellant and his son had joined their moneys, tools and activity for the enterprise. The intention of participating of the profits was clear as both had resigned from their respective employment. Their livelihood depended on the business they ran together. All the elements of article 1738 of the Civil Code (which defined partnerships) were present.
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