Sambasiva Rao, Actg. C.J.
1. The following question of law was sent for our decision by the Income-tax Appellate Tribunal, Hyderabad, at the instance of the assessee :
' Whether, on the facts and in the circumstances of the case, the assessee-firm is entitled to registration under the provisions of the I.T. Act, 1961, for the assessment year 1962-63 '
2. The assessee is a firm constituted under a deed of partnership dated February 5, 1955. It had 5 partners consisting of father and four sons, the last of them being a minor. He was represented by his father and guardian, the first partner. While the four adult partners signed for themselves, the father, as natural guardian, signed for the minor partner. An application was made for registration under the Partnership Act on October 18, 1955. An objection was raised by the Registrar that in the deed, the minor was also made to share losses along with profits which is contrary to Section 30 of the Partnership Act. He, therefore, wanted a rectification removing this defect. Thereupon, the four major partners wrote a letter to the Registrar saying that the minor was admitted to the benefits of the partnership with the consent of all the partners and he had nothing to do with the losses of the firm. They informed the Registrar that they agreed to record their consent and amend the application accordingly. On this letter, the Registrar accorded registration to the firm on January 10, 1956. For the assessment year 1956-57, an application was also made (under the I.T. Act) for registration and the same was granted. Renewals were granted up to the assessment year 1961-62. It may be mentioned here that for assessment year 1961-62, the accounting year was 1960 and for the next year of assessment 1962-63, the accounting year was 1961.
3. By virtue of the powers conferred on him under Section 33B of the Indian I.T. Act, 1922, the CIT called for examining the records and found that the deed of partnership violated the provisions of Section 30 and, therefore, the registration granted by the ITO was wrong in law and was prejudicial to the interests of the revenue. He thereupon issued a notice to the assessee to show cause as to why registration should not be set aside. The assessee-firm filed its objections, the principal of them being that the defect in the original deed of partnership was cured by the letter dated December 18, 1955. The Commissioner was not satisfied with this explanation, holding thatthe letter of consent was neither a rectification deed, nor a supplementary deed of partnership. He found that the partnership itself was invalid according to the provisions of the Partnership Act. Therefore, the Commissioner held that the registration granted to the assessee was erroneous in law. He accordingly set aside the grant of registration and its renewal from the assessment years 1957-58 to 1961-62, The assessee carried the matter to the Tribunal, but did not meet with any success. Thereupon, a reference was made to this court on the question whether, on the facts and in the circumstances of the case, the assessee-firm was entitled to registration under Section 26A of the Act. This court answered the question in favour of the revenue on the reasoning that the original partnership deed was invalid for the reason that the minor was made a full partner and that the letter of December 18, 1955, did not cure the defect in the deed. The assessee, without resting content with this decision of the High Court, travelled to the Supreme Court. That court also held that the assessee was not entitled to registration. The principal ground on which the Supreme Court held against the assessee was that the application for registration filed by the assessee was an invalid one. This decision of the Supreme Court is Sri Ramamohan Motor Service v. CIT : 89ITR274(SC) . The Supreme Court did not express any opinion whether the partnership was validated as a result of the letter written by the adult partners of the firm to the Registrar on December 18, 1955.
4. It appears that an application for registration for the assessment year 1962-63, for which the corresponding accounting year was the calendar year 1961, was made. It may also be noted that a new partnership deed was executed on June 28, 1962, whereunder the minor was shown to have been admitted to the benefits of the partnership but was not liable to share losses. According to the document, the new arrangement was that losses were to be shared by the major members alone equally. The firm made the application for registration on 30th of June, 1962, in Form 11 and also for continuation of registration in Form 12, The ITO refused registration for this year also on the ground that the new partnership deed was not operative in the relevant year of account, viz., the calendar year of 1961, during which the old defective deed was in operation and, therefore, the assessee was not entitled to registration as in the earlier years. The AAC in appeal agreed with this view. The matter was once again carried to the Tribunal. There, it was argued that the applications for registration and renewal were valid inasmuch as the minor was shown to have a share in the profits only and not liable to share losses which were to be shared equally by the major partners, It was contended there that the grounds on which the Supreme Court upheld the refusal of registration for the earlier years were no longer in existence for the assessment year 1962-63. It was also argued that the letter of 18th December, 1955, filed before the Registrarand the new deed of partnership dated June 28, 1962, should be sufficient to cure the defect in the original deed. The Tribunal did not accede to this argument. It held that a fresh partnership deed was executed after the expiry of the year of account and so the earlier defective deed of 1955 was operative throughout the year of account. Consequently the assessee was not entitled to registration on the basis of the fresh deed. Thereupon, the assessee requested the Tribunal to refer the question which is extracted at the beginning of our judgment for the opinion of the High Court to which the Tribunal agreed and made a reference.
5. Sri K. Mangachari, the learned counsel for the assessee, contends that, admittedly, the present case will have to be considered in the light of the I.T. Act of 1961, which came into force on April 1, 1962. He invited our attention to the observation of the Tribunal in the statement of the case that in so far as the present assessment year, i.e., 1962-63 is concerned, the case is governed by the provisions of the I.T. Act, 1961. To this proposition, Mr. Rama Rao, the learned standing counsel for the revenue, has no objection. The arguments before us have proceeded on the basis that it is only the 1961 Act that applies to the case. Sri Mangachari's contention is that there is a vital difference between the language of Section 26A of the 1922 Act and Section 184 of the 1961 Act. Under the old Act, the firm for the registration of which an application was to be made, should be one constituted under an instrument. However, under Section 184(1)(i) of the 1961 Act, it is sufficient if the partnership is evidenced by an instrument. Relying on the partnership deed of 28th June, 1962, the learned counsel submits that the partnership is evidenced by this deed. Under Sub-section (4) of Section 184, the application shall be made before the end of the previous year for the assessment year in respect of which registration is sought. Sub-section (2) of Section 185 requires the ITO, when he considers that the application for registration is not in order, to intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from the date of such intimation ; and if the defect is not rectified within that period, the ITO shall, by order in writing, reject the application. Since the ITO has not given any such intimation as required by Section 185(2), so argues Shri Mangachari, it must be deemed that the ITO was satisfied with the application and should have, therefore, granted registration to the firm. His refusal to grant registration is, therefore, contrary to Sections 184 and 185.
6. On the other hand, Sri P. Rama Rao, the learned standing counsel for the I.T. department, points out that the scope of Section 185(2) is only limited to intimating to the firm any defects in the application and does not extend to the basic invalidity of the partnership deed. If the partnership deed itself was not in accordance with law and is vitiated by any illegality then,according to Sri Rama Rao, Section 185(2) has no application. He supported the view taken by the I.T. authorities as well as the Tribunal that the partnership deed of June 28, 1962, has no application to the calendar year 1961 for which the assessment year is 1962-63. It is for this year that registration was asked for and refused. The partnership deed of June 28, 1962, could not apply to the calendar year of 1961 and, therefore, the Tribunal and the departmental authorities were right in thinking that the old defect in the partnership deed of 1955 alone continued to apply. Such being the case, the principle enunciated by this court and the Supreme Court on the earlier occasion continues to apply to the sanction or refusal of registration to the assessee.
7. We find considerable force in the contention of Sri Rama Rao. We have already pointed out that the answer to the question placed before us should be given on the basis of the 1961 Act. Section 184 provides for application for registration. Sub-section (1) says that an application for registration of a firm for the purposes of the Act may be made to the ITO on behalf of any firm if the partnership is evidenced by an instrument and the individual shares of the partners are specified in that instrument. Sub-section (4) requires that the application should be made before the end of the previous year for the assessment year in respect of which registration is sought. The proviso enables the ITO to entertain an application made after the end of the previous year if he is satisfied that there was sufficient cause for not making the application before the end of the previous year. Sub-section (5) is very material. It requires that the application shall be accompanied by the original instrument evidencing the partnership together with a copy thereof. The proviso to the sub-section once again confers power on the ITO to accept a copy of the instrument if he is satisfied that for sufficient reason the original instrument cannot conveniently be produced. Then Section 185 lays down the procedure to be adopted by the officer on receipt of application. Sub-section (2) requires the ITO to intimate to the firm any defects in the application.
8. The year for which the business was done by the partnership and for which the assessment was made in the year 1962-63 expired with 31st of December, 1961. Therefore, according to Sub-section (4) of Section 184, the application should have been made on or before 31st of December, 1961, for the assessment year 1962-63. However, the firm applied for registration on 30th June, 1962. Apart from this delay, there is the fatal defect in the application for registration, viz., the absence of any other instrument of partnership, other than the invalid one of 1955 in existence, by that time. The new partnership deed came into existence on 28th of June, 1962. Therefore, there was BO possibility of complying with the mandatory requirement of Sub-section (5)by the assesses, by filing the original valid instrument along with the application on or before 31st of December, 1961. What the ITO can do under Section 184(4) is only to entertain an application even at a late stage if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year. But he has no jurisdiction to grant registration on a partnership deed which was not in force during the relevant period, namely, the calendar year 1961. He has no power or jurisdiction to condone the delay in filing the partnership deed or its copy. In fact, as we have pointed out, by 31st of December, 1961, the new partnership deed curing the defects did not come into being and the old partnership deed was still in force. Therefore, the ITO was very much right in refusing to grant registration on the basis of the old partnership deed, without taking into account the partnership deed which came into existence after the expiry of the accounting year of 1961. The Tribunal is very much right in upholding this decision. This view is fully supported by the decision of the Supreme Court in N. T. Patel & Co. v. CIT : 42ITR224(SC) . There, a new instrument of partnership was in existence in the accounting year, but it did not specify the shares which condition was fulfilled by the deed of rectification dated September 17, 1955. The Supreme Court, in the circumstances, held that it could not be said that there was the requisite instrument of partnership specifying the individual shares of the partners during the year of account and the High Court was right in holding that the firm was not entitled to registration. The right for registration can be only claimed in accordance with the statute and the person seeking relief must bring himself strictly within the terms of the statute, since the right is strictly regulated by its terms. A Division Bench of the Kerala High Court held in CIT v. Joseph & George : 77ITR292(Ker) that under Section 184(4) ands. 184(5) of the 1961 Act, the application for registration should be made before the end of the previous year. Therefore, if the application is made even on the last day of the accounting year, the firm must be registered for the next assessment year. The application for registration should be accompanied by the document of partnership. Therefore, the document should be in force on the day on which the application for registration was made ; it need not be in force on any previous day, although the partnership should be in existence for the whole of the accounting year. The power of the ITO under the proviso to Sub-section (4) of Section 184 is only to entertain an application for registration of a firm made after the end of the previous year and to excuse the delay in filing the application for registration, but does not extend to excuse the delay in drawing up the document of partnership itself. This decision fully accords with the view we have expressed above about the scope of Section 184(4) and the proviso thereto. Consequently, the assessee cannot take advantage of thepartnership deed dated June 28, 1962, to secure registration for the partnership which did its business in the accounting year 1961.
9. Sri Mangachari relies on a Bench decision of this court in Addl. CIT v. Chekka Ayyanna : 106ITR313(AP) . The Division Bench held that Section 185(1)(b) of the 1961 Act brings within its purview not only an application filed for the first time for registration but also cases where the continuity of previous registration was refused for such subsequent years. Further, if the declaration is defective and the assessee has not rectified the same within the time given, any order passed by the ITO would be under Section 185(1)(b) and hence such an order is appealable under Section 246(j) either from the view point of s. 185(1)(b) or Section 185(3) of the Act. Patently, this decision does not help the contention of Shri Mangachari. The defect in the application of the assessee for registration in the present case is basic and fundamental. The partnership deed in accordance with which the business was done in the relevant year 1961 is invalid. It has been so found by a Division Bench of this court on the earlier occasion. Therefore, the Tribunal is right in holding that the assessee cannot take advantage of the latter partnership deed to secure registration for the year 1961.
10. In the result, we answer the question in the negative, against the assessee and in favour of the revenue. The revenue will have its costs from the assessee. Advocate's fee Rs. 250.