Jagannatha Shetty J.
1. The following question has been referred to this court under s. 256(1) of the I.T. Act, 1961, at the instance of the Revenue :
'Whether, on the facts and in the circumstances of the case, the I.T. A.T. is right in upholding the orders of the AAC with regard to the granting of registration to the assesses firm even though the partnership deed produced by the assesses firm before the ITO was defective in the sense that it was under stamped and any subsequent rectification to the deed will be effective from the date of rectification as per the provisions of the Indian Stamp Act ?'
2. The facts have been succinctly stated in the stated in the statement of the case and we may briefly set out hereunder only those that are relevant for our purpose.
3. The dispute in these cases relates to the assessee's right to registration of the partnership deed. The deed was undisputedly executed on September 3, 1973, on an insufficient stamp paper. The application for registration in Form No. 11A was field by the assessee on June 20, 1974, along with the said instrument. The ITO rejected the application for registration on the sole ground that the instrument was under stamped.
4. In the appeal before the AAC, the assessee made good the deficiency in the stamp duty payable on the instrument. Thereupon the AAC accepted the instrument and directed the ITO to grant the registration prayed for.
5. Against that order of the AAC the Department preferred an appeal to the Tribunal. The Tribunal has affirmed the order of the AAC and dismissed the appeal.
6. Before the Tribunal it was urged on behalf of the Department that the payment of deficit stamp duty on the instrument would not render the instrument valid from the date of its execution and at best it could be considered as a valid instrument of partnership from the date on which the deficiency has been made good. The Tribunal has rejected that contention holding that once the instrument is properly stamped and admitted in evidence by the AAC that instrument evidences the existence of a firm in accordance with the terms thereof and the deed comes into effect from the date of execution and not from the date on which it is admitted into evidence.
7. It seems to us that the view taken by the Tribunal is unassailable. Section 184(1)(i) of the I.T. Act provides :
'(1) An application for registration of a firm for the purposes of this Act may be made to the Income-tax Officer on behalf of any firm, if -
(i) the partnership is evidence by an instrument.'
8. Section 184(4) provides :
'The application shall be made before the end of the previous year for the assessment year in respect of which registration is sought : ........'
9. Section 184(5) provides :
'The application shall be accompanied by the original instrument evidencing the partnership, together with a copy thereof : ....'
10. There is no dispute that all these requirements have been complied with by the assessee while seeking registration of the firm in question. The only defect noticed was in the stamp duty payable on the instrument.
11. Chapter IV of the Karnataka Stamp Act, 1957, contains provisions relating to instruments not duly stamped.
12. Section 34 states that instruments not duly stamped are inadmissible in evidence.
13. Section 35 states that when an instrument has been admitted in evidence such admission shall not, except as provide under s. 58, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.
14. Section 41 provides that when the duty and penalty on any instrument have been paid, the person admitting such instrument in evidence shall certify by endorsement thereon that the proper duty and penalty, if any, have been levied in respect thereof and every instrument so endorsed shall thereupon be admissible in evidence and may be registered and acted upon and authenticated as if it had been duly stamped and shall be delivered on his application in this behalf to the person from whose possession it came to the hands of the officer.
15. These provisions clearly indicate that when once the deficiency in the stamp duty is made good and the document is received in evidence, then it shall be acted upon as if it had been duly stamped.
16. It is not the case of the Department that the AAC had no power to receive the document when the deficit stamp duty was paid by the assessee. The AAC in exercise of his undoubted power has received the document in evidence after the assessee paid the required stamp duty and thereupon it could be acted upon as if it had been duly stamped.
17. In Hindustan Steel Ltd. v. Dilip Construction Co., AIR 1969 SC 1238, the Supreme Court, while examining the scope of ss. 35 and 36 of the Indian Stamp Act, 1899, has observed at p. 1240 :
'Relying upon the difference in the phraseology between section 35 and 36 it was urged that an instrument which is not duly stamped may be admitted in evidence on payment of duty and penalty, but it cannot be acted upon because section 35 operates as a bar to the admission in evidence of the instrument not duly stamped as well as to its being acted upon, and the Legislature has by section 36 in the conditions set out therein removed the bar only against admission in evidence of the instrument. The argument ignores the true import of section 36. By that section an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not only duly stamped, but on that account there is no bar against an instrument not duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of section 42(2) which enact, in terms unmistakable, that every instrument endorsed by the Collector under section 42(1) shall be admissible in evidence and may be acted upon as if it had been duly stamped.
The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments : it is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the Revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. Viewed in that light the scheme is clear. Section 35 of the Stamp Act operates as a bar to an unstamped instrument being admitted in evidence or being acted upon; section 40 provides the procedure for instruments being impounded; sub-section (1) of section 42 provides for certifying that an instrument is duly stamped, and sub-section (2) of section 42 enacts the consequences resulting from such certification'.
18. It follows from these principles that the document could be acted upon from the date of its execution and not from the date on which the deficiency in the stamp duty is made good.
19. In the result, therefore, we answer the question in the affirmative and against the Revenue.