1. This is a reference under sub-section (1) of section 66 of the Indian Income-tax Act. The assessee is a partnership firm consisting of three partners. It appears that these three partners entered into an agreement of partnership on 18th April, 1946. The terms and conditions on which they agreed to do partnership business were reduced to writing in a deed executed on April 1, 1947. The partnership was constituted for five years from April 18, 1946. That period of five years expired on 17th April 1951. We are here concerned with the assessment year 1958-59, the relevant previous year being the calendar year 1957. Now, even though the period mentioned in the aforesaid deed of partnership had expired on 17th April, 1951. We are here concerned with the assessment year 1958-59, the relevant previous year being the calendar year 1957. Now, even though the period mentioned in the aforesaid deed of partnership had expired on 17th April, 1951, the partnership business of the assessee firm seems to have continued to carry on the business in the relevant assessment year. The assessee firm applied for renewal of registration of the partnership for the relevant assessment year. That application was made on 17th June, 1958. The income-tax authorities refused to grant registration and rejected the application. The Tribunal also has affirmed the view taken by the income-tax authorities. Hence this reference. The question referred to us is as follows :
'Whether, on the facts and circumstances of the case, the renewal of registration of the firm for the assessment year 1958-59 under section 26A of the Act could be granted on the basis of the said deed of partnership dated April 1, 1947 ?'
2. Mr. Kaka, appearing for the assessee, first contended that the assessee firm is constituted under a deed of partnership of date April 1, 1947. That deed specifies the respective shares of the partners in the profits and losses of the firm; and that even after the period of duration of the partnership, namely, five years, mentioned in the deed, expired on 17th April, 1951, as a result of section 17(b) of the Indian Partnership Act, the firm continues to be constituted under the deed of partnership. In our view, the contention has little force. The effect of section 17(b) is not what is stated by Mr. Kaka. Section 17(b) provides that 'subject to contract between the partners, where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will.' It will be seen that all that this clause provides is that after the expiry of the term mentioned in the partnership deed, only the mutual rights and duties would remain the same as mentioned. It is not the same thing as to say that the partnership that continues to do business after the expiry of the period is a partnership constituted under that deed of partnership. There is a vital difference between the two types of partnership i.e. partnership for foxed duration under a deed of partnership and the partnership that continues to carry on the business after the expiry of the period mentioned in the deed. In the one case, it is a partnership for a fixed duration, which can be dissolved only after the expiry of the period, save and except where on account of the misconduct of a partner dissolution is called for at the hands of the court. Now, the partnership that continues to do business after the expiry of the term is a partnership at will, and any partner can, by giving a notice to all the partners, dissolve it or put it to an end at his sweet will. In our opinion, therefore, the partnership that continues to do business after the expiry of its term cannot be said to be a partnership constituted under the deed of partnership. The first contention raised by Mr. Kaka should therefore fail.
3. It is next contended by Mr. Kaka that section 26A which confers right on a partnership to apply for registration does not require that the deed under which the partnership was constituted should be operative in the relevant assessment year. All that section 26A requires is that there should be a deed, under which the partnership is constituted, and the deed must specify the shares of the partners. If there is such a deed, even if it ceases to be operative in the relevant assessment year, the partnership is entitled to get itself registered. It is not possible to accept this contention of Mr. Kaka. Sub-section (1) of section 26A confers a right on partners to apply for registration of the partnership when the partnership is constituted under a deed of partnership and the deed of partnership specifies the individual shares of the partners. Sub-section (2) provides that 'the application (for registration) shall be made by such person or persons, and it such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed'. The relevant rules have been framed under section 59 of the Income-tax Act. Rule 3 provides for an application to be made in the prescribed form. Clause (2) of the prescribed form shows that the application for registration is to be accompanied either by the original instrument of partnership or a certified copy of the instrument of partnership under which the firm is constituted. Rule 4 provides that if the Income-tax Officer is satisfied about certain things mentioned in the rules, he shall endorse a certificate on the instrument of partnership in the following form :
4. Instrument of partnership 'This - has this certified copy of an instrument of partnership
5. day been registered with me, the Income-tax Officer..... under section 26A of the Indian Income-tax Act, 1922, and this certificate of registration shall have effect for the assessment for the year assessment for the year ending on the 31st day of March....'
6. Rule 6 requires a firm, to whom a certificate of registration has been granted, to apply for renewal in each assessment year before a particular date mentioned therein. The form in which an application for renewal is to be made is also similar to that for the original registration of the firm, and clause (2) of this application form also requires that an instrument of partnership in original or its certified copy has to accompany the application for renewal of registration. Rule 6A is in the following terms :
'On receipt of an application under rule 6 the Income-tax Officer may, if he is satisfied that the application is in order and that there is or was a firm in existence constituted as shown in the instrument of partnership, grant to the assessee a certificate signed and dated by him in the following form :-
'The registration of the firm of.... granted on... is renewed by me and will remain effective for the assessment for the year ending on the 31st day of March....'
7. The aforesaid relevant rules and the form of application for registration or for the renewal of registration leave no doubt that registration or its renewal could only be granted to a firm if there is in operation a deed of partnership under which the partnership has been constituted or so constituted in the relevant assessment year. It will be seen that registration or its renewal remains in force only for the relevant year and it cases to have any effect at the end of that year. In each year there is to be a separate application, in the first year for its registration, and for the subsequent years for renewal of registration. The procedure prescribed for making an application for registration as well as its renewal is similar in terms and nature. In each year, the Income-tax Officer has to satisfy himself that there is a firm or there was a firm constituted under a deed of partnership in the relevant assessment year and that the deed of partnership specified respective shares of the partners. These being the provisions of law, the contention raised by Mr. Kaka has little force.
8. The same argument is advanced by Mr. Kaka slightly in a different form. It is his contention that once the partnership is registered under a deed of partnership, it is entitled to registration even if the deed ceases to be operative. It is not necessary to deal separately with this contention. The reasons given by us for rejecting the second contention equally apply to the third contention also. In our opinion, therefore, there must be a deed of partnership, under which the firm is constituted. That deed of partnership must specify the respective shares of the partners, and the deed must be operative in the year relating to which registration or its renewal is asked for. If these conditions are not satisfied, in our opinion, the requirements of section 26A are not satisfied, and therefore the Income-tax Officer would be entitled to refuse registration. We have already shown that the deed of partnership of date April 1, 1947, under which the partnership was constituted, was not operative in the assessment year 1958-59, and the Tribunal, therefore, was not in error in affirming the orders of the income-tax authorities refusing registration. The view taken by us finds support in Commissioner of Income-tax v. D. Arokiaswami Chetti & Co. and Commissioner of Income-tax v. Gelli Krishnamurthy. It has been pointed out in Rao Bahadur Ravulu Subba Rao v. Commissioner of Income-tax by their Lordships of the Supreme Court, at page 172 that registration of a partnership firm confers on the partners a benefit to which they would not have been entitled but for section 26A, and such a right being a creature of the statute, can be claimed only in accordance with the statute which confers it, and a person who seeks relief under section 26 A must bring himself strictly within its terms before he can claim the benefit of it. In R.C. Mitter & Sons v. Commissioner of Income-tax various contentions which should be fulfilled to enable the partners to get their firm registered have been enumerated, and existence of a deed of partnership constituting the firm and specifying the respective shares is one of those conditions pointed out therein.
9. For the reasons stated above, our answer to the question is in the negative. The assessee shall pay the costs of the Commissioner.
10. Question answered in the negative.