Govinda Bhat, J.
1. This is a reference under section 256(1) of the Income-tax Act, 1961, hereinafter called 'the Act', made at the instance of the assessee. The question of law referred is :
'Whether, on the facts and in the circumstances of the case, the assesses firm is entitled to registration ?'
2. The assesses firm made an application for registration under section 185 of the Act in the assessment year 1967-68. The Income-tax Officer rejected that application and treated the assessee as an 'association of persons' for the assessment year 1967-68. On appeal by the assessee the Appellate Assistant Commissioner of Income-tax, Belgaum Range, affirmed the said order. The Income-tax Appellate Tribunal, Bangalore Bench, further affirmed that order in I.T.A. No. 91 (Bang) of 1969-70.
3. The deed of partnership dated April 8, 1965, provided as per clause (2) to carry on the business of excise contractors and as per clause (3) to carry on such business as contemplated under the deed of partnership was not commenced, but during the said year the assessee invested the contributions made by the partners with another firm called 'M/s. Narayan & Co.' who were excise contractors. The investment of the moneys with M/s. Narayan & Co., it is conceded, does not amount to carrying on business under the terms of the partnership.
4. The question is whether the assessee is entitled to registration. Section 185 of the Act lays down the conditions on the fulfillment of which the Income-tax office shall grant registration. Section 185 reads :
'185. (1) On receipt of an application for the registration of firm, the Income-tax Officer shall inquires into the genuineness of the firm and its constitution as specified in the instrument of partnership, u and - (a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment years :
(b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm......' (sub-sections (2), (3), (4) and (5) omitted as unnecessary). Sri k. Srinivasan learned counsel for the assessee, submitted that the terms and conditions laid down by section 185(1)(a) have been satisfied and therefore the Tribunal was in error in refusing to register the firm. The learned counsel invited our attention to the decision of the Supreme Court in Commissioner of Income-tax v. Sivakasi Match Exporting Co. 1 which was a case under section 26A of the 1922 Act. Subba Rao J., as he then was said :
A combined effect of section 26A of the Act and the rules made there under is that if the application made by a firm gives the necessary particulars prescribed by the rules, the Income-tax Office cannot reject i0t, if there is a firm in existence as shown in the instrument of partnership. A firm may be said to be not in existence if it is a bogus or not a genuine one, or if in law the constitution of the partnership is void. The jurisdiction of the Income-tax Officer is, therefore, confined to the ascertaining of two facts, namely, (i) whether an application for registration is in conformity with the rules made under the Act, and (ii) whether the firm shown in the document presented for registration is a bogus one or has no legal existence.'
5. In Commissioner of Income-tax v. A Abdul Rahim and Co. 2 the statement in Sivakasi Match Exporting Company's case 1 was reiterated. Sri. K. Srinivasan urged that in the instant case both the conditions laid down by the Supreme Court have been satisfied and, therefore, the assessee was entitled to registration.
6. Sri S. R. Rajasekhara Murthy, learned counsel for the revenue, contended that the existence of business is essential and in the absence of the existence of a business there is no legal existence for the firm. Therefore, he argued that the Tribunal was right in refusing registration.
7. In our opinion, that submission made by S. R. Rajasekhara Murthy is right. Whether or not a firm has any legal existence has to be decided under the provisions of the Partnership Act. Section 4 of the Partnership Act defines 'partnership' as 'the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.' The actual existence of a business carried on by the partners the business contemplated under the partnership deed did no commence during the relevant accounting period, it cannot be said that there was in existence any partnership. The Tribunal, therefore, was right in rejecting the application for registrations. Accordingly, we answer the question referred in the negative and against the assessee.
8. The assessee will pay the costs of the respondent. Advocate's fee Rs. 250.
9. Question answered in the negative.