1. This is a reference under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), made by the Income-tax Appellate Tribunal, Bangalore Bench, at the instance of the Commissioner of Income-tax, Bangalore, relating to the assessment year 1970-71, corresponding to the previous year ending on June 30, 1969.
2. The question of law referred to this court for opinion is :
'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assesses firm was entitled to the benefit of continuance of registration under section 184(7) of the Income-tax Act, 1961 ?'
3. The assessee is a firm of partners carrying on business at Chikmagalur in petrol and petroleum products, fertilisers, etc., under the name and style of 'M/s. S. V. Ratnaswamy & Sons'. The said firm has been constituted by a deed of partnership dated January 1, 1966.
4. During the relevant accounting year, there were size partners. After the end of the relevant previous year end on July 1, 1969, a fresh partnership deed is stated to have been drawn up amongst the five of the said six partners, excluding S.R. Ramachandra, one amongst the original six partners, whose whereabouts had not been known since November 1, 1968. The firm as originally constituted had been grated registration under section 184 of the Act for the earlier years. On August 10, 1970, the firm filed along with its return of income for the assessment year 1970-71 a declaration envisaged in proviso (ii) to sub-section (7) of section 184 of the Act in the prescribed form signed by the said continuing partners who constituted the firm as on that date and also by one Parvathamma, claiming to be the legal representative and mother of the said S.R. Ramachandra, whose where about were not known. On the basis of this declaration, the Income-tax Officer, Chikmagalur, granted continuance of registration of the firm for the said assessment year 1970-71 and on December 7, 1970, the firm was accordingly assessed in the status of a 'registered firm' for that year.
5. The Additional Commissioner of Income-tax, on a perusal of the records of this assessment, took the view that the declaration in Form No. 12 filed before the Income-tax Officer in the course of the proceedings for the said assessment year 1970-71 should have been signed personally by each one of those partners, including S. R. Ramachandra, whose whereabouts were stated to be unknown and that the grant of continuance of registration to the firm on the basis of Form No. 12 as filed by the said five partners and by the said Parvathamma, the mother of the said S. R. Ramachandra, were erroneous and prejudicial to the interests of the revenue, within the meaning of section 263 of the Act. Accordingly, after affording to the assessee an opportunity of being heard in the matter, the Additional Commissioner of Income-tax, in exercise of his revisional power under section 263 of the Act, held that the declaration in Form No. 12 was not valid and consequently the assessment of the firm in the status of a 'registered firm' was erroneous and prejudiced the interest of the revenue. In that view of the matter, by order dated October 28, 1971, he set aside the assessment order passed by the Income-tax Officer for the assessment year 1970-71 and directed the said Income-tax Officer to make a fresh assessment of the firm in the status of an 'unregistered' firm with the necessary and consequential amendments in the cases of the individual partners. Aggrieved by this order, the assessee appealed to the Income-tax Appellate Tribunal.
6. The Tribunal, accepting the contention of the assessee, took the view that the declaration in Form No. 12 was liable to be made only by the partners who constituted the firm as on the date of making of the said declaration and that as the said application was made on August 10, 1970, when only five amongst the original partners, excluding the said S. R. Ramachandra, were the continuing partners, the declaration in Form No. 12 signed by them was sufficient compliance with the requirements of the law and that the fact that one more person, Parvathamma, had also signed the form was a mere surplusage which did not, ipso facto, detract from the validity and efficacy of the declaration which was otherwise in accordance with law. Accordingly, the Tribunal by its order dated October 3, 1972, set aside the order dated October 28, 1971, passed by the Additional Commissioner of Income-tax under section 263 of the Act and restored the order of assessment dated February 7, 1970, made by the Income-tax Officer. The basis of this decision by the Tribunal posited and proceeded on the premise that 'persons concerned' who, under rule 24 of the Income-tax Rules, 1962, had to make a declaration in Form No. 12, for the purpose of securing continuance of registration, were those referred to in sub-rule (5) of rule 22 which, according to the reasoning, identified such 'persons concerned' as 'all the partners (not being minors) in the firm as constituted at the date of the application'.
7. In the reference before us, Sri S. R. Rajasekhara Murthy, learned counsel for the revenue, contends that view as to the validity of the declaration in Form No. 12 taken by the Tribunal is erroneous. His contention is that for a declaration in Form No. 12 to be valid, it has to be made by the 'persons concerned' as contemplated in rule 24 of the Income-tax Rules. Rule 24 of the Income-tax Rules, 1962, reads :
'Declaration for continuation of registration. - The declaration to be furnished under sub-section (7) of section 184 shall be in Form No. 12 and shall be verified in the manner indicated therein and shall be signed by the persons concerned in accordance with sub-rule (5) or rule 22.'
8. Sri S. R. Rajasekhara Murthy contends that the expression 'in accordance with sub-rule (5) or rule 22' occurring in the said rule 24 merely contemplates and invokes the mode in which the persons concerned are required to sign the form, the emphasis being that except in the exceptional circumstances enumerated in the said sub-rule, the common law rule qui facit per alium facit per se is statutorily departed from. According to Sri S. R. Rajasekhara Murthy the said sub-rule does not qualify the expression 'persons concerned' occurring in rule 24 by identifying them as 'all the partners (not being minors) in the firm as constituted at the date of the application'. The Tribunal, in its finding in favour of the validity of the declaration as made in the case, has, no doubt, proceeded on the premise that the expression 'persons concerned' in rule 24 has to be ascertained with reference to the provisions in sub-rule (5) of rule 22 and accordingly understood to mean 'all the partners (not being minors) in the firm as constituted at the date of the application'. Sri K. Srinivasan, learned counsel for the assessee, seeks to support this reasoning adopted by the Tribunal. There may, perhaps, be something to be said in favour of the contentions urged by Sri S.R. Rajasekhara Murthy. But, in the circumstances of the present case, this distinction becomes merely an academic one, as, in our opinion, even if the persons liable to made the declaration in Form No. 12 are identified with reference only to the expression 'persons concerned' occurring in rule 24 and not with reference to sub-rule (5) of rule 22, there is support, in the scheme of the 'Act', for the view that it is the partners of the 'firm' as subsisting and as constituted on the date of making of the declaration that are envisaged in the said expression 'persons concerned'. The expression 'persons concerned' are necessarily those whose interest would be adversely affected, if there is a 'non-continuance' of the registration. The expression 'concerned', inter alia, means 'affected' or 'troubled'. the enquiry must necessarily by directed to the as containment as to the parties who would be adversely affected if there is a non-continuance of the registration of the firm. Section 187 of the Act provides that where at the time of making an assessment under the provisions of the Act it is found that a change has occurred in the constitution of a firm, the assessment 'shall be made on the firm as constituted at the time of making the assessment'. Section 184 of the Act, which deals with registration of firms reads :
'184. Application for registration. - (1) An application for registration of a film for the purposes of this Act may be made to the Income-tax Officer on behalf of any firm, if -
(i) the partnership is evidenced by an instrument; and
(ii) the individual shares of the partners are specified in that instrument.
(2) Such application may, subject to the provision of this section, be made either during the existence of the firm or after its dissolution....
(7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year :
Provided that -
(i) there is no charge in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted; and
(ii) the firm furnishes, along with its return of income for the assessment year concerned, a declaration to that effect, in the prescribed form and verified in the prescribed manner.....'
9. What emerges from a reading of the provisions of sub-section (1) of section 187 and of sub-section (7) of section 184 together is that the concept of a 'registered firm' as an assessable entity under the Act has, subject to certain conditions, an element of durability as such assessable entity for the subsequent years also and that the furnishment of a declaration contemplated by the second proviso to sub-section (7) of section 184 of the Act is by the 'firm' alone, which, in turn, could only mean its partners as constituted at the time of making such declaration. It is these partners should could be adversely affected in consequence of a non-continuance of the registration.
10. Again, in the form prescribed for the declaration the declarants have to subscribe, inter alia, to the following statement :
'......We, on behalf of................... declare that -(name of firm)(i) our firm was granted registration for the assessment year 19.....19....... vide order dated....... 19...... passed by the Income-tax Officer............ and............'
11. This form of declaration would be in apposite in the case of erstwhile partners.
12. The above reasoning points inescapably and irresistible to the conclusion that the 'persons concerned' referred to in rule 24 are the partners of the 'firm' as constituted at the date of making the declaration under the second proviso to sub-section (7) of section 184 of the Act. The conclusion as to the validity of the declaration made in the present case reached by the Tribunal, therefore, becomes supportable, though, however, on a different reasoning.
13. In the result, we answer the question referred to us in the affirmative as against the revenue. The assessee will be entitled to its costs. Advocate's fee Rs. 250.
14. Question answered in the affirmative.