This is a reference under Section 66(1) of the Indian Income-tax Act, and three questions have been referred to us for answer. The questions are as follows :-
'(1) Whether on the true construction of the deed of partnership, dated 15th September, 1932, Krishna Murari was admitted as a partner of the firm or was he admitted to the benefits of partnership ?
(2) If Krishna Murari was admitted as a partner, could such a deed of partnership be registered under Section 26A of the Indian Income-tax Act, 1922, and the rules made under the Act and
(3) Whether the application dated 23rd July, 1943, was in order regard being had to Rules 2-6B of the Indian Income-tax Rules, 1922 ?'
The facts briefly are that Gajadhar Ram and Benarsi Lal were cousins. Gajadhar Ram had two sons, Sundar Mal and Jagdish Prasad. Sundar Mal is dead and his widow had adopted Krishna Murari, son of Jagdish Prasad. Gajadhar Ram, Benarsi Lal, Jagdish Prasad and Krishna Murari were members of a joint Hindu family, and on the 15th September, 1932, there was a partition between them and a deed of partition was executed. On the 15th October, 1932, they purported to enter into a partnership, each of them being given a four annas share.
We have read the document carefully. The document fails to take into account the fact that Krishna Murari was a minor and the document purports to be an agreement between the minor and the three adult persons to enter into a partnership with equal rights and obligations. In paragraph 1 of this document it was agreed that the partnership was to continue until the lifetime of the partners unless it was previously terminated by mutual consent. In the next paragraph it was provided that on the death of any of the partners it was open to the remaining partners to agree to admit the legal representatives of the deceased partner into the partnership and continue the business as before.
On the 24th January, 1943, Krishna Murari died. Who was his legal representatives was not very clear from the facts, and learned counsel for the assessee in his argument assumed that Jagdish Prasad, his natural father, was his legal representative. It is now clear, however, from certain other documents that Krishna Murari was adopted by Sundar Mals widow after the death of Sundar Mal and on the death of Krishna Murari, his adoptive mother, became his legal representative. From 1934-35 to 1940-41 the firm was assessed as a registered firm and the registration was renewed from year to year. It appears that it was not noticed by the Income-tax Officer that Krishna Murari was a minor, or if it was noticed by him he might have thought that it was a valid partnership. On the 26th July, 1943, an application under Section 26A for renewal of the partnership for the year 1942-43 was filled under the signatures of Gajadhar Ram, Benarsi Lal and Jagdish Prasad. Jagdish Prasad purported to sign for Krishna Murari deceased also. The application was dismissed by the Income-tax Officer on the 15th September, 1943. There was an appeal to the Assistant Commissioner who dismissed the appeal on the 13th January, 1945, and a further appeal to the Appellate Tribunal also failed. The Appellate Tribunal was of the opinion that the certificate given in the application under Section 26A that the constitution of the firm and the individual shares of the partners had remained unaltered was incorrect, that one partner having died and this application having been made only by Gajadhar Ram, Benarsi Lal and Jagdish Prasad, Krishna Murari being dead, the constitution of the firm had been altered and that there could be no valid partnership between a minor and the adult members.
An application was thereupon field on behalf of the assessee to refer certain questions of law to this Court for its opinion. The Tribunal referred the three questions which we have mentioned above.
Coming to the first question whether on the true construction of the deed of partnership, dated 15th September, 1932, Krishna Murari was admitted as a partner of the firm or was he admitted to the benefits of partnership, it is clear enough that the three adult members purported to ignore the fact that Krishna Murari was a minor. For all intents and purposes they dealt with him as if he was a major, and the operative part of the document, which is very important, is in these terms :-
'...... the first, second, third and fourth parts do and each of them both hereby declare and mutually covenant and agree to become partners in the business of commission agency and merchandise subject to the terms and conditions and stipulations hereto following.....'
There can be no doubt that the minor was incapable of entering into such a contract and though in England such an agreement is voidable at the option of the minor, in this country, since a minor is incapable of entering into a contract, the contract on his behalf is void subject to such benefits that he may be entitled to get under Section 30 of the Indian Partnership Act.
In the deed of partition dated the 15th September, 1932, it is mentioned that Benarsi Lal had in Sambat 1982 adopted Jagdish Prasad and in 1983 Sundar Mal died and Sundar Mals widow adopted Krishna Murari in Sambat 1987. Under the Hindu law, therefore, the widow of Sundar Mal was the natural guardian of the minor, Krishna Murari. The deed of partnership was executed on behalf of Krishna Murari by his natural father Jagdish Prasad. After the adoption, Jagdish Prasad ceased to be the natural guardian of the minor and he held no right to enter into contract on behalf of the minor, In the absence of the consent of the natural guardian of the minor, it is not even possible to hold that the minor was admitted to the benefits of the Partnershi : (see Govindoss v. Official Assignee, Madras. The question in that case was whether the mother of the minor had agreed on behalf of her minor son. Their Lordships observed :-
'Reference should be made to an alternative ground on which the High Court were prepared to base their decision against the appellant, viz., that the Court was entitled, in the State of the evidence, to infer that, after the death of Krishna, the appellant, though a minor, was admitted to the benefits of the partnership in terms of Section 247 of the Indian Contract Act. Ramesam, J., state : We must therefore infer, in the absence of any member of the family giving us information on the point, that the mother agreed and therefore the other partners admitted him to the benefits of the partnership at any rate.'
The respondents counsel was not prepared to support this ground. In their Lordships opinion, no such inference could legitimately be made from the absence of the appellants mother from the witness box. Such an act of admission to partnership must be proved, but, in the present case, the possibility of such an act of admission to partnership must be proved, but, in the present case, the possibility of such an act of admission appears to be completely negatived by the evidence as to the joint family basis on which the business was carried on subsequent to the death of Krishna.'
We are, therefore, of the opinion that the minor, Krishna Murari, was neither a partner of the firm Hardutt Ray Gajadhar Ram nor was he admitted to the benefits of the partnership.
In view of the answer given by us to the first question, the second question does not arise and does not call for any answer.
There can be no doubt that the application was not in order and was not in accordance with the Rules 2-6B. Learned counsel for the assessees has urged that as the partnership was registered in the previous years and the application for renewal for the year 1941-42 which had been filed on the 30th March, 1943, had not yet been finally disposed of by the Appellate Tribunal, the application dated the 26th July, 1943, was correctly filed as an application for renewal.
On the facts stated above that Krishna Murari was dead, that the legal representative had not signed the application, that the application did not state that one of the partners had died and his legal representative had been admitted into the partnership nor was any signature obtained of the legal representative who was not a minor and a false certificate was given that the constitution of the firm had not been altered, the answer can only be in the negative.
Learned counsel for the department is entitled to the costs of this application which we fix at Rs. 500.
Reference answered accordingly.