1. The assessee in these two cases is a firm carrying on business under the name and style of Messrs. Jagadish Jakati & Co., at Belgaum. The assessment years in question are 1969-70 and 1970-71.
2. The firm, Messrs. Jagadish Jakati & Co., Belgaum, was constituted under a partnership deed dated October 12, 1967. The firm applied for registration under s. 184 of the I. T. Act, 1961, before the ITO for the assessment year 1969-70 and the ITO granted registration. For the assessment year 1970-71, the firm applied for a continuance of the registration before the ITO and it was also granted. The CIT being of opinion that the orders granting registration and continuance of registration were erroneous and prejudicial to the interests of the revenue, took action under s. 263 of the I. T. Act, 1961, and after hearing the assessee, he directed the withdrawal of the registration and re-registration ordered by the ITO and directed him to pass fresh orders of assessment as in the status of association of persons. Aggrieved by the orders of the CIT, the assessee filed two appeals before the Income-tax Appellate Tribunal, Bangalore Bench. The Tribunal allowed the appeals and restored the orders of registration and re-registration. At the instance of the CIT, the following questions of law have been referred to us as arising out of the two cases :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, on a proper construction of the partnership deed dated 12th October, 1967, the minor, Shivashankar, was not made a full-fledged partner liable to share in the losses of the assesses firm and, hence, the assessee was entitled to the benefit of registration for the assessment year 1969-7
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, on a proper construction of the partnership deed dated 12th October, 1967, the minor, Shivashankar, was not made a full-fledged partner, liable to share in the losses of the assesses firm and, hence the assessee was entitled to the benefit of continuance of registration for the assessment year 1970-7 ?'
3. Briefly stated, the facts of the case are these : As mentioned earlier, the partnership came into existence under the partnership deed dated October 12, 1967. The relevant portions of the deed read as follows :
'This partnership is made on the 12th day of October in the year 1967, between and by, and executed this deed of partnership by the following persons described below :
(1) Shri Jagadish, age 27 years, son of Shivabasappa Jakaty, resident of Tigadi, Tal : Bailhongal, Dist. Belgaum.
(2) Shri Balasaheb, age 25, son of Shivabasappa Jakaty, resident of Tigadi, Tal : Bailhongal, Dist. Belgaum.
(3) Shri Sadashiv, age 20, son of Shivabasappa Jakaty, resident of Tigadi, Tal : Bailhongal, Dist. Belgaum.
(4) Shri Shivashankar, age 13, son of Shivabasappa Jakaty, resident of Tigadi, Tal : Bailhongal, Dist. Belgaum, minor by guardian Shri Shivabasappa Virabhadrappa Jakaty, age 63, resident of Tigadi, Tal : Bailhongal, Dist. Belgaum.
4. Hereinafter for the sake of brevity referred to as the first party, second party, third party and fourth party, respectively.
5. Whereas the parties aforesaid have agreed to carry on the business of hire purchase in partnership within the Belgaum district or in such other places as may be decided upon by majority decision and to carry on any other business which may decided upon by majority decision in addition to or in substitution of hire purchase on the following terms and conditions which are mutually agreed upon with free consent of each party.
1. The business shall be carried on under the name and style of 'Jagadish Jakaty & Co.' at Tigadi, Taluka Bailhongal, Dist. Belgaum, and in such other places which will be decided by majority decision.
2. The firm shall deal in hire purchase business and any other business which will be decided by majority decision.
3. The firm shall be deemed to have commenced its business with effect from 12th October, 1967.
4. The duration of partnership shall be at will and can be dissolved only by majority opinion of the partners and it shall continue not with standing retirement, death, insolvency or other incapacity of any partner, and in case of death with the legal heirs or the representatives of the deceased partner.
5. The first party shall be managing partner who will be in-charge of the business and he can take up or appoint staff required for carrying on the business. He shall continue till he expresses his unwillingness or becomes unable to work due to incapacity. The remuneration of the managing partner is fixed at the rate of Rs. 250 per month and this pay shall continue till it is increased by all the partners unanimously.
The managing partner shall have the following powers and duties......
7. If any partner wants to retire from partnership during its subsistence he shall do so by giving a notice six months in advance (clear calendar months) and he shall be deemed to have retired on the last date of the month in which his notice has been received. Accounts should be taken as on that day and paid off as per the accounts. There shall not be any valuation for 'goodwill'. If all the partners retire at one or the other time except two and the last partner also wants to retire or by majority opinion if it is resolved to dissolve the partnership and if any one of the partner wants to continue the business of the firm he shall be allowed to do so without valuing the goodwill of the firm in the same 'Trade Name'.
8. Capital and profits are to be equally contributed and shared by all the partners.
9. The registered office shall be at Tigadi, Taluka : Bailhongal, until it is changed by majority opinion.
10. Any difference of opinion between the partners touching the rights and liabilities or the management of the business it shall be forthwith referred to arbitrators who shall be three in number...
6. It is seen from the above partnership deed that four persons, namely Jagadish, Balasaheb, Sadhashiv and Shivashankar have been treated as partners of the firm. Shivashankar was a minor on the date of the partnership deed and he was represented by his guardian, Shivabasappa Jakaty. There is no recital in any part of the deed that the minor was being admitted to the benefits of the partnership. On the other hand, the recitals indicate that he was being treated for all intents and purposes as a partner with the same rights and obligations as the other three partners Jagadish Balasaheb and Sadhashiv. There is also no indication that Shivashankar the minor partner, would not be personally liable for any losses of the firm. In fact, the deed is silent about the manner in which the losses have to be borne by the partners in question. Presumably, the parties understood that the losses have also to be borne by them in the same proportion in which the profits had to be shared equally. In the instant case, the CIT set aside the orders of registration and continuance of registration holding that 'the partnership deed read as a whole does not mention anywhere that the minor is admitted to the benefits of partnership, nor can it be inferred from any of the clauses...... That when a minor is found to have been made a full-fledged partner and is also made liable for losses, the benefit of registration to such firms has to be denied'. The Tribunal relying upon the decision of the Supreme Court in CIT v. Shah Mohandas Sadhuram : 57ITR415(SC) held that : 'As long as the partnership deed does not make a minor full partner the deed cannot be regarded as invalid on the ground that the guardian has purported to contract on behalf of the minor if the contract is for the purpose of admitting the minor to the benefits of the partnership'. The Tribunal was of opinion that the guardian of Shivashankar had executed the deed on behalf of the minor, only for the purpose of securing benefits of the partnership for the minor having in view s. 30(1) of the Partnership Act, which provided that a person who was a minor according to law to which he was subjected might not be a partner in a firm, but, with the consent of all the partners for the time being, he might be admitted to the benefits of the partnership. It was of opinion that the deed should be construed accordingly.
7. A question similar to the question arising in these two cases came up for consideration before the Supreme Court in CIT v. Dwarkadas Khetan & Co. : 41ITR528(SC) . In that case also, the facts were more or less similar except that the profits had to be shared unequally and that the partnership deed had been signed both by the minor and by his natural guardian. There was no recital in any part of the partnership deed indicating that the minor who was also a party to the document was being admitted to the benefits of the partnership and was not a full-fledged partner. The Supreme Court noticed that there was a distinct cleavage of opinion among the High Courts at that time. The Bombay, Madras and Patna High Courts had held that where a minor was admitted as a full partner by adult partners the document could be registered after interpreting it to mean that the minor had been admitted to the benefits of the partnership and not as full partner. The Calcutta, Allahabad and Punjab High Courts had taken a contrary view. The leading case which was relied on behalf of the assessee was the decision in Jakka Devayya & Sons v. CIT : 22ITR264(Mad) . In that case the High Court of Madras had held that where there were three partners, one of whom was a minor, the fact that the minor was included as a partner did not make the partnership as between the two adult partners invalid and that minor must be deemed to have been admitted to the benefits of the partnership by the two adults relying upon s. 2(6B) of the Indian I. T. Act, 1922, which stated :
''Partner' includes any person who being a minor has been admitted to the benefits of partnership.'
8. The High Court of Madras observed that in view of that definition and the fact that a minor could be admitted to the benefits of partnership under s. 30 of the Partnership Act the document was not invalid, but must be read as giving to the minor the rights laid down in the Partnership Act. On the other hand, in Hoosen Kasam Dada v. CIT : 5ITR182(Cal) , the High Court of Calcutta had held that under s. 26A of the Indian I. T. Act, 1922, and the Rules the ITO was only empowered to register a partnership which was specified in the instrument of partnership and of which registration was asked for. It further held that it was not open to the department to register a partnership different from that which was formed by the instrument.
9. Disagreeing with the view of the Madras High Court in Jakka Devayya and Sons v. CIT : 22ITR264(Mad) and approving the view taken by the Calcutta High Court in Hoosen Kasam Dada v. CIT : 5ITR182(Cal) , the Supreme Court observed as follows : 41ITR528(SC) :
'In our opinion, the Calcutta view is preferable to the view taken by the Madras High Court. The error in the Madras view is in using the definition to show that a deed including a minor as a competent partner is valid. What the definition does is to apply to a minor admitted to the benefits of partnership all the provisions of the Income-tax Act applicable to partners. The definition cannot be read to mean that in every case where a minor has, contrary to law, been admitted as a full partner, the deed is to be regarded as valid, because, under the law, a minor can be admitted to the benefits of partnership. The rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of partnership must be considered, apart from the definition in the Income-tax Act.
10. Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If the income-tax authorities register the partnership as between the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the income-tax authorities to register a document which is different from the one actually executed and asked to be registered. In our opinion, the Madras view cannot be accepted.'
11. Accordingly, the Supreme Court reversed the decision of the High Court of Bombay and set aside the order granting registration.
12. Sri K. Srinivasan, learned counsel for the assessee, drew our attention to two decisions of the Supreme Court which were pronounced on the same day : CIT v. Shah Mohandas Sadhuram : 57ITR415(SC) and CIT v. Shah Jethaji Phulchand  57 ITR 588, and contended that it was possible to hold in these cases that the deed in question satisfied the requirements of s. 184 of the I. T. Act. In the case of Shah Mohandas Sadhuram : 57ITR415(SC) , it was no doubt true that two minors had been referred to as members of the partnership-firm. But the partnership deed in question expressly stated in its preamble that the minors (the third and fourth members thereof) were being admitted to the benefits of the said partnership but not to the liabilities thereunder. The Supreme Court held that the said recital 'expressly states that it is the major members who had decided to constitute the partnership and admit the minors to the benefits of the said partnership. The rest of the clauses must be construed in the light of this recital... In our opinion, the partnership deed, reasonably construed, only confers benefits of partnership on the two minors and does not make them full partners. The guardian has agreed to certain clauses in order to effectuate the decision of the major members to confer the benefits of the said partnership to the minors. Accordingly, we hold that the income-tax authorities should not have declined to register the firm. ' In the next case of Shah Jethaji Phulchand : 57ITR588(SC) , the Supreme Court found that in the recital in clause (9) of the partnership deed in question there was sufficient indication that the minor was being admitted to the benefits of the partnership as can be seen from the following observation (p. 591) :
'The question then arises whether the deed makes the minor a full partner or he has been admitted only to the benefits of partnership. There is no doubt that on a true interpretation of sub-clause (9), the minor is not to bear any losses; the losses are to be borne by Nathmal Jethaji. Sub-clause (16) does not make the minor a working partner. The only persons who were entitled to be the working partners are Nathmal Jethaji, Phulchand Nathmal and Sakalchand Thikmaji. It is in the light of these clauses that the other clauses should be construed.'
13. Accordingly, the Supreme Court was of opinion that there was no fatal defect in the partnership deed in question and the assessee was entitled to the registration prayed for. From the foregoing, it is clear that neither of these two cases is of any assistance to the assessee, as we do not find any recital in the partnership deed in question indicating that the minor, Shivashankar, was only being admitted to the benefits of the partnership of the firm in question.
14. It was, however, argued by Sri K. Srinivasan, that the argument that, in the absence of a recital that the minor should personally bear the losses, the firm would be entitled to the registration, had not been addressed or considered by the Supreme Court in the case of Dwarkadas Khetan & Co. : 41ITR528(SC) , and it was possible to take a view different from the view expressed by the Supreme Court. We do not think that on the ground that a particular argument was not considered by the Supreme Court while deciding a particular case, we can disregard its decision when the point in issue has been decided by it (vide Smt. Somawanti v. State of Punjab, : 2SCR774 ). We are of opinion that the view taken by the decision in Dwarkadas Khetan & Co. : 41ITR528(SC) clearly applied to the facts and circumstances in these two cases and the decision therein precludes us from taking a contrary view.
15. Accordingly, we hold that the Tribunal was in error in construing the partnership deed as one by which the minor, Shivashankar, had been admitted only to the benefits of the partnership. The questions referred to us are answered in the negative and in favour of the department. No costs.