Satish Chandra, C.J.
1. Doubting the correctness of the law laid down in earlier decisions of this court in Ganesh Lal's case : 68ITR696(All) and in Ram Narain's case : 84ITR233(All) , a Division Bench of this court has referred the following question of law to a Full Bench :
'Where a minor admitted to the benefits of a partnership, attains majority and elects to be a partner of the firm, is there a change in theconstitution of firm as contemplated by Clause (i) of the prov. to Sub-section (7) of Section 184 of the I.T. Act, 1961?'
2. Chap. XVI of the I.T. Act lays down special provisions applicable to firms. Head 'A' is entitled Assessment of firms. It consists of Section 182 (assessment of registered firms) and Section 183 (assessment of unregistered firms). Head 'B' is entitled Registration of firms. It consists of Sections 184 to 186. Under section 184(1) an application for registration is to be made if the constitution of the partnership is evidenced by an instrument and the individual shares of the partners are specified in that instrument. The application for registration is to be signed by all the partners (not being minors) personally. It has to be made before the end of the previous year for the assessment year in respect of which registration is sought. The application is to be accompanied by the original instrument evidencing the partnership. Last, but not the least, the application is to be made in the prescribed form and is to contain the prescribed particulars.
3. Section 185(1) provides the procedure. It says:
'185. (1) On receipt of an application for the registration of a firm, the Income-tax Officer shall inquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, 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 year;
(b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm.'
4. The Explanation to Section 185(1) furnishes some guidelines to determine the genuineness of a firm and its constitution. In the latter respect the enquiry is whether the constitution is as specified in the instrument of partnership. If the finding on these two aspects is in the affirmative, the ITO is to record a certificate of registration on the instrument of partnership.
5. Sub-section (7) of Section 184 provides for continuation of registration for subsequent years. It says :
'(7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year :
(i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted; and
(ii) the firm furnishes, before the expiry of the time allowed.....adeclaration to that effect, in the prescribed form and verified in theprescribed manner.....'
6. Where a firm has been registered, the general rule is that the registration shall have effect for every subsequent year. For subsequent years, theITO has to see that 'there is no change in the constitution of the firm or the shares of the partners, as evidenced by the instrument of partnership on the basis of which the registration 'was granted'. The enquiry begins with the instrument of partnership. Which instrument The instrument, on the basis of which the registration was granted. The ITO has to see that instrument and satisfy himself that in the subsequent year in question there is no change in the constitution of the firm or the shares of the partners from that mentioned in the instrument. In other words, the constitution of the firm or the shares of the partners should be in accordance with the instrument of partnership.
7. The phrase 'constitution of the firm', or for the matter of that 'the shares of the partners' has not been defined by the I.T. Act. In the context, the phrase 'constitution of the firm' refers to the identity of the partners of the firm. Thus, the identity of the partners as well as their shares ought to be such as is evidenced by the instrument of partnership. If for any subsequent year there is a change either in the constitution of the firm or the shares of the partners and such change is not evidenced by the instrument, the original registration shall not have effect. But if it is found that the constitution of the firm or the shares of the partners continues to be evidenced by the instrument, then it will be a case where the conclusion will be that there has been no change.
8. A change in the constitution, that is, in the identity of the partners, may take place when a person is introduced as a partner, or a partner retires, or is expelled, or ceases to be a partner on his becoming insolvent, or dies or a minor becomes major.
9. The provisions in Sections 184 and 185 of the Act are intended to protect the interests of the revenue. The idea is to see that the tax may not be evaded by surreptitiously changing the partners or their shares in a manner which is not evidenced by the instrument.
10. So long as the interests of the revenue are safeguarded, there seems nojustification to interpret these provisions from a theoretical or technicalviewpoint.
11. If the changes, either in the constitution or the shares which are specified or evidenced by the instrument were not intended to be recognised without a fresh instrument, then Clause (i) of the prov. should have read :
'that the original constitution of the firm or the shares of the partners continue unchanged'.
12. In the present cases, we are concerned with the problem of minors and death of a partner.
13. Under Section 30(1) and (2) of the Indian Partnership Act, a minor cannot be a partner. He can be admitted to the benefits of the partnership. On attaining majority, if he so elects, he, under Section 30(5), becomes a partner. Hisshare is the same to which he was entitled as a minor--vide Section 30(7)(b). He shares in losses also.
14. When the partners agree to admit a minor to the benefits of a partnership, they are deemed to agree that if the minor on attaining majority so elects, he will become a partner, without a fresh agreement. That is why no fresh agreement or instrument is needed.
15. The I.T. Act makes a departure in the treatment of minors qua partnership. S. 2(23) of the Act says :
'2. (23) 'firm', 'partner' and 'partnership' have the meanings respectively assigned to them in the Indian Partnership Act, 1932 (IX of 1932); but the expression 'partner' shall also include any person who, being a minor, has been admitted to the benefits of partnership.'
16. For purposes of the I.T. Act a minor admitted to the benefits of the partnership is to be deemed to be a partner, entitled to all the benefits conferred on a partner by the Act. Thus, when an instrument of partnership evidences a constitution indicating that apart from some partners, a minor has been admitted to its benefits, the instrument of partnership will be deemed to evidence, for purposes of the I.T. Act, that the constitution of the firm was as if the minor was also a partner. When a minor becomes major, and on his opting becomes a partner within the meaning of the Indian Partnership Act, no change occurs in the constitution of the firm under the I.T. Act. The instrument of partnership evidences the same number and identity of partners as before.
17. An instrument of partnership has to be reasonably construed in the background of the general law. If an instrument provides that a minor who has been admitted to the benefits of the partnership will become a partner if he so elects on his attaining majority, there is no difficulty. But if an instrument confers on a minor the benefits of the partnership and then it is silent, the general law will apply ; and it will be deemed that in view of Section 30 of the Indian Partnership Act, the instrument evidences that on the minor electing to remain a partner on his attaining majority he will be a partner. The only situation where it can be said that the instrument does not evidence this development will be where it, on a reasonable construction, is held to provide to the contrary, namely, that a minor will have no right to continue even if he elects to do so.
18. In view of the fact that the I.T. Act deems a minor to be a partner, there can be no change in the constitution of the firm by the mere fact of his attaining majority and electing to remain a partner. He was already a partner, and he continues as a partner.
19. The second part of the enquiry is whether there has been a change in the shares of the partners as evidenced by the instrument of partnership. Where the instrument foresees the eventuality of a minor becoming majorand makes provision for the distribution of the shares at that time, the instrument evidences the change in the shares. But if the ITO is unable to ascertain the shares from the instrument, it will be a case where the instrument does not evidence the change.
20. A minor is not liable to share in the losses though he is entitled to share in the profits. The share of the loss relatable to the share of the minor has hence to be provided for. The redistribution of the shares in loss on the minor attaining majority has also to be ascertained. If, on a reasonable construction of the instrument of partnership, these matters cannot be ascertained, it will be a case where the instrument of partnership does not evidence the change in the shares.
21. The important thing is not that there should be no change at all, but that if there is a change, it must be evidenced by the original instrument.
22. There is a difference of opinion on the question whether an instrument should expressly specify the shares in losses. Our High Court in Hiralal Jagannath Prasad v. CIT : 66ITR293(All) and Laxmi Trading Co. v. CIT : 62ITR770(All) , has ruled that there is no need for the instrument to actually specify the shares in losses. On the other hand, the High Courts of Mysore (R. Sannappa & Sons v. CIT : 66ITR27(KAR) ), Gujarat (Thacker & Co. v. CIT : 61ITR540(Guj) ), Kerala (C.T. Palu & Sons v. CIT : 72ITR641(Ker) , CIT v. Ithappiri & George  88 ITR 333) and Andhra Pradesh (CIT v. Mandyala Govindu & Co. : 82ITR926(AP) ) have laid down that a valid instrument ought to specify the shares in losses. The question came up before the Supreme Court in Mandyala Govindu's case : 102ITR1(SC) . The Supreme Court did not deem it necessary to settle this conflict. It held that the ITO must be in a position to ascertain the shares of the partners in the losses even if the Act did not require the shares in the losses to be specified in the instrument of partnership. In that case, the instrument of partnership specified the shares in profits unequally; one partner was entitled to 31%, while the other two partners to 23% each, and the minor to another 23%. There was no clause specifying the proportion in which the three adult partners were to share the losses, if any. Since the shares in the profits were unequal, the general presumption under Section 13(b) of the Indian Partnership Act, that the losses must be shared in the same proportion as the profits, was not applicable. It was held that even if the adult partners bore the losses in proportion to their respective shares in the profits, the amount of loss in the minor's share will still remain undistributed. It was further observed (page 7):
'Will the partners between them bear this loss equally, or to the extent of their own individual shares To this the instrument of partnership does not even suggest an answer. There is, therefore, no means of ascertaining in this case how the losses are to be apportioned.'
23. It was held that the firm was not entitled to be registered on the basis of such an instrument.
24. As an illustration, let us take the facts of I.T.R. No. 637 of 1972. The firm was constituted under a deed of partnership dated 8th April, 1960. It consisted of four adult partners and two minors were admitted to its benefits. One of the minors, Chandi Prasad, attained majority on 21st June, 1964, He opted to continue as a partner. Clause (4) of the document provided that the four adults as well as the two minor partners were to have two annas eight pies share in a rupee each. It further provided that the profits shall be shared in proportion to the shares mentioned above, but in case of loss it will be shared by the four partners in equal proportion, that is, one-fourth each.
25. Clause 11 of the deed provided that on majority Chandi Prasad and Ashvini Kumar will become full-fledged partners shouldering all the responsibilities of the firm like any other major partner of the firm. Here two minors are involved. Only one, that is, Chandi Prasad attained majority on June 21, 1964. How will the losses be shared The partnership instrument only says adult partners will share losses equally, i.e., one-fourth each, Chandi Prasad will be liable under Section 30(7)(b) of the Indian Partnership Act to share losses to the extent of two annas eight pies only. There is no provision that he will share losses equally with the other four partners, i.e., one-fifth. There is a provision that though the share of adult partners is two annas eight pies each their share in losses will be one-fifth each. Since the shares cannot be ascertained from the instrument, it is a case where there has been a change in shares but the instrument does not evidence it. The firm is not entitled to continuation of registration.
26. The facts of Reference No. 510 of 1974 are that the firm was constituted under an instrument of partnership dated 1st April, 1952. It consisted of three major partners. They admitted a minor, Shyam Manohar Lal Gupta, to the benefits of the partnership. Clause 8 provided that the profits and losses of the partnership business 'shall be divided between and borne by the partners in the following proportions :
(1) Ram Charan Lal Gupta 1/4th
(2) Radhey Shyam Gupta 1/4th
(3) Shyam Sunder Lal Gupta 1/4th
(4) Shyam Manohar Lal Gupta 1/4th
27. Provided that the said Shyam Manohar Lal Gupta during the periodof his minorship shall be confined to the extent of his respective share inthe profits and property of the firm.'
28. Clause 11 provided that on attaining majority Shyam Manohar Lal Guptawill become full-fledged partner without any change in the profit-sharingratio and that he will be responsible for losses also. The document doesnot expressly provide how the losses will be shared during the minority ofShyam Manohar Lal Gupta as well as on his attaining majority.
29. Reading Clauses (8) and (11) together, the position is that the three majorpartners were to share the losses between them only because the minor wasgiven one-fourth share in the profits only. When the minor attainedmajority he was made liable for the losses to the extent of his share in theprofits, namely, one-fourth. A reasonable construction of the instrument,therefore, leads to the conclusion that during the minority of ShyamManohar Lal Gupta the three major partners would share the losses equally,while on the minor attaining majority their share of losses will be one-fourth each. In this case, it is possible to ascertain the shares in loss bothduring Shyam Manohar's minority as well as after he attained majority.The instrument of partnership, therefore, specifies and evidences thechange in shares that is to occur when Shyam Manohar Lal Gupta attainsmajority and he elects to continue as a partner. In this case the instrumentof partnership evidences the effect of the minor partner becoming major.There is hence no need to require the partners to execute a fresh documentmerely to ascertain their shares after the minor had become major.
30. In I.T.R. No. 378 of 1974 the firm was constituted under a partnership deed dated 24th June, 1963. It consisted of two adult partners. Three minors were admitted to its benefits. One of the minors, Ashok Kumar, attained majority on 11th July, 1965. He opted to continue as a partner. Clause (4) of the deed provided that the net profit or loss of the firm will be shared by the partners in proportion to the shares mentioned below against each:
Gur Saran Lal
four annas in a rupee
six annas in a rupee
two annas in a rupee
two annas in a rupee
two annas in a rupee.
31. The last three were minors. They were admitted to the benefits of the partnership. It was further provided that 'the losses will be borne by the parties hereto called of the first and second parts till they attain majority'. Clause (8) provided that 'on majority the minors will automatically become full-fledged partners shouldering all the responsibilities of the firm like any other partner'.
32. Here the deed made adequate provision for the shares in profits as well as in losses till the three minors attained majority. The shares of the two adult partners were not equal. There is no provision as to how the losses willbe shared if and when one of the minors became major. The minors had a two annas share each. When one minor became a major he would have a two annas share in losses. But there is no indication in the deed as to how the four-annas share in losses of the other two minors was going to be shared between the original two adult partners and the minor who had attained majority. On one minor attaining majority the position would be that one partner has four annas while the other has six annas and the third two annas. The shares being unequal, the presumption under Section 13(b) of the Indian Partnership Act, that the share in losses will be in the same proportion in which the profits are shared will not solve the problem, because the share in losses attributable to the minors would remain undistributed. The document does not give an adequate answer to this problem. Hence, the change in the shares brought about by one minor attaining majority is not evidenced by the instrument of partnership.
33. The vital thing is to read the clause as a whole and not concentrate only on the words 'no change'. The correct test is: Is the change, if any, evidenced by the instrument of partnership ?
34. Under sub-section (8) of Section 184 where any such change has taken place in the previous year, the firm has to apply for fresh registration. The word such emphasises that the change is one which is not evidenced by the instrument of partnership.
35. The view taken in Ganesh Lal's case : 68ITR696(All) and Ram Narain's case : 84ITR233(All) is the same, that on a minor attaining majority a change takes place in the constitution of the firm, and the firm must apply for fresh registration under Section 184(8) of the Act, In these cases, it was held that the definition of partnership in Section 4 of the Indian Partnership Act envisages an agreement between the parties. A minor lacking contractual capacity cannot enter into a contract. A partnership in which a minor is admitted to its benefits consists only of major partners, while the minor is only admitted to its benefits. The minors could not bind themselves during their minority to become partners on their attaining majority, and the option could be exercised by the minors only after they attain majority. Beyond admitting them to the benefits of the partnership, the partnership deed could not make them partners. The constitution of the firm evidenced by the partnership deed consisted only of major partners. It could not in law contemplate that the minors admitted to the benefits of the partnership would necessarily and automatically become partners. The conclusion was that when the minor attains majority a change takes place in the constitution because the minor then becomes a partner. The declaration in the deed that on attaining majority the minor will automatically become a partner is meaningless. The Bench observed that there is no dispute that the expression 'partner' as defined in the I. T. Act includesa minor who has been admitted to the benefits of the partnership. But it ruled that 'whether there was a change in the constitution of the firm for the purpose of applying the provisions of the I. T. Act relating to the registration of firms cannot be decided by that definition. None of the sections from Sections 184 to 186, which deal with the registration of firms, defines what is intended by the expression 'a change in the constitution of the firm' used in different places in those sections. For that we must turn to the law contained in the Indian Partnership Act.' (See : 84ITR233(All) ).
36. Under the Indian Partnership Act a minor is admitted to the benefitsof the partnership; he is not a partner. Parliament knew this positionand for that reason it, in Section 2(23), specifically included such a minor in thedefinition of 'partner'. For purposes of the I. T. Act a minor was apartner just as a major is. The expression 'partner' as used in Section 184 or Section 185 will be presumed to carry the defined meaning unless there is something to the contrary in the co'ntext. It is agreed that the phrase 'changein the constitution of the firm' occurring in Section 184(7) means change in theidentity of the partners of the firm. A firm consisting of two majorpartners to which a minor is admitted consists of three partners in the eyeof the I. T. Act. When a minor attains majority and opts to remain in, hebecomes a full-fledged partner under the Indian Partnership Act, but sincehe was already a partner within the meaning of I.T. Act, there is no change in the number of partners or in their identity.
37. The principle that a minor lacks contractual capacity is neither material nor relevant. The guardian of the minor acts on his behalf, and the action of the guardian is valid in law, unless the minor on attaining majority repudiates it on some good grounds. The fact that the minor could not bind himself during his minority to become a partner on attaining majority is equally irrelevant. No one says that the minor on attaining majority becomes a partner only because that was the agreement in the original deed. The agreement in the original deed evidenced the consent of the other major partners to accept the minor as a partner. When he becomes a major, the minor is free to exercise his option. The crux of the matter is whether there is any change in his position under the I. T. Act when he opts to remain in, on attaining majority. Since he was already a partner, he continues as a partner.
38. If the instrument of partnership contemplates and provides for such asituation, there is no change in the constitution of the firm as evidenced byit. In our opinion, Ganesh Lal's case : 68ITR696(All) and RamNarain's case : 84ITR233(All) do not lay down the law correctly.
39. The next class of cases is of death of a partner. It is settled law that on the death of a partner the constitution of the firm changes. But thisdoes not solve the problem. It has further to be seen whether the change is adequately provided for by the instrument of partnership.
40. If an instrument provides that on the death of a partner his legal representatives shall become partners, it evidences the consent of the existing major partners to the heirs of the deceased partner coming in without execution of a fresh agreement. A legal representative is, of course, not bound by this agreement, but if he elects to become a partner he does not have to execute any agreement with the existing partners because the consent of the existing partners is already there.
41. Section 42(c) of the Indian Partnership Act provides that normally a firm dissolves on the death of a partner, unless there is a contract to the contrary. If the partners agree that on the death of one of them the firm shall not stand dissolved, but shall continue, no dissolution occurs. (See Mt. Sughra v. Babu, : AIR1952All506 and CIT v. Seth Govindram Sugar Mills : 57ITR510(SC) .
42. It is also settled that all the partners need not sign the instrument of partnership so long as those who have not signed, assent to being partners. Such a document is admissible for registration under the I. T. Act. (See CIT v. R. Dwarkadas & Co. : 80ITR283(Bom) ).
43. If an instrument postulates the contingency of a partner dying, and provides that in his place his legal representative will be entitled to become a partner and further provides how the shares will be distributed, in that event the change will be evidenced by the instrument of partnership. The ITO will be in a position to ascertain the identity as well as the shares of the partners. It will hence not be necessary to force the partners to execute a fresh instrument.
44. But in order to avail of the continuance of registration the original instrument must be able to answer the query as to what are the shares of the partners on the death of one followed by substitution of another in his place.
45. In ITR No. 854 of 1972, there were nineteen partners under the original instrument dated 14th November, 1955. It provided that on the death of one partner, his legal representative shall be substituted with the same share as the deceased. If a partner dies and is replaced by a legal representative, who is an adult, there will be no difficulty. He will share the profits as well as losses in the same way as his .predecessor did. But if it so happens that the legal representative of a deceased partner is a minor, as is in fact the case in this reference, difficulty arises. Narottam Das Tandon, one of the partners, died. His legal representative was Harish Tandon, a minor son. On being co-opted as a partner, this minor was entitled to the benefits; he was not liable to share the losses. There is no indication inthe instrument as to how the share in the losses relatable to the minor wasto be distributed amongst the other partners.
46. Clause (5) of the instrument gives the shares of various parties. They vary from 304 pies out of 3,072, that is in a rupee, to 84 pies. The nineteen partners have varying shares. Clause (12) provided that on retirement or death of a partner, the firm shall not be dissolved and the business may continue to be carried on by the remaining partners. Clause (13) said that on retirement or death of a partner, the remaining parties may carry on the business with an altered share of profits and losses. If they may agree to admit any other person as a partner in place of the outgoing partner orin the sharing of profits or losses, it shall not affect the continuance of the partnership. Under clause (14) on the death of a partner his legal representative was entitled to the same rights as have been specified in various clauses of the deed in relation to the retiring partner, provided that on the death of a part- ner the remaining partners may admit his successor legal representative as a new partner on the same terms on which the deceased was a partner.
47. It is obvious that the partnership deed does not provide for redistribution of the share in losses of the existing partners in case the deceased partner is succeeded by a minor legal representative. Since the shares of the partners are unequal, the presumption under Section 13(b) cannot be applied. On facts, therefore, the partnership deed fails to evidence the change in the shares of the partners, though it evidences the change in the constitution of the firm.
48. In Wajid Ali's case  UPTC 532 (All), a Bench of this court ruled that the death of a partner followed by inclusion of his legal representative in his place results in a change in the constitution of the firm and it could no longer be given the benefit of the continuance of registration on the basis of the original partnership deed. The Bench relied upon an earlier decision of this court in Panna Lal Babu Lal v. CIT : 73ITR503(All) .
49. In our opinion, the statement of the law in Wajid Ali's case  UPTC 532 is not quite accurate. The Bench did not give due importance to the phrase 'as evidenced by the instrument of partnership' occurring in Clause (i) of the prov. to Section 184(7) of the I.T. Act. It is true that on the death of a partner the constitution changes, but as already observed, that is not the end of the matter. It is further to be seen whether the instrument evidences the change satisfactorily. In Wajid Ali's case  UPTC 532, the crucial term was that the heir of the deceased partner who resides in India shall be included on such terms and conditions as is mutually agreed. This shows that the instrument itself left the question of the terms and conditions, including shares of the incoming partner, open. It did not make any provision for it. On a reading of the instrument it was not possible to infer as to what was the share of the incoming partner. On facts, therefore, the original instrument was not entitled to be given the benefit of renewal of registration of the firm.
50. Another question which has been canvassed in Reference No, 854 of 1972 is whether the firm so reconstituted is liable to be assessed on the income earned by the firm prior to its reconstitution, namely, prior to the death of the partner.
51. Wajid Ali's case  UPTC 532 (All) suggests that, in view of Section 184(7), only the reconstituted firm is liable to be assessed for the entire year. This does not, however, solve the difficulty.
52. In Shiv Shanker Lal's case : 106ITR342(All) a Division Bench of this court held that Section 187 merely makes a new firm liable to be assessed in respect of the income derived by the old firm. But this section, even by implication, does not create a fiction that the income derived by the old firm becomes the income of the reconstituted firm. The income of the old firm cannot be clubbed with the income of the reconstituted firm. After reconstitution the firm becomes a distinct assessable entity, different from the firm before its reconstitution. Therefore, two different assessment orders have to be passed against the reconstituted firm--one in respect of the income derived by it before reconstitution, and the other in respect of the income derived by it after reconstitution. The Bench drew support for this view from the decision of the Mysore High Court in Bharat Engineering Co.'s case : 67ITR273(KAR) .
53. We find ourselves in agreement with the view expressed in Shiv Shanker Lal's case : 106ITR342(All) .
54. I.T.R. No. 637 of 1972, I.T.R. No. 378 of 1974 and I.T.R. No. 510 of 1974 relate to minors. The problem is whether there is a change when a minor attains majority. Our answer to the question referred for our opinion is :
'Where a minor admitted to the benefits of a partnership attains majority, and elects to be a partner of the firm, there is no change in the constitution of the firm, but there is a change in the shares of the partners. In case the original instrument of partnership evidences this change, the firm is entitled to continuance of registration under Section 184(7) of the Act.'
55. In I.T.R. No. 854 of 1972, the question is whether there is a change in the constitution of the firm on the death of a partner. This reference was caused because a Bench of this court doubted the correctness of Wajid Ali's case  UPTC 532 (All). Our answer in this reference is :
'The law laid down in Wajid Ali's case  UPTC 532 (All) is not correct. A change occurs in the constitution of the firm when a partner dies and his heir replaces him. The firm will be entitled to continuance of registration on the basis of the original instrument of partnership if thatinstrument evidences the change. Further, two separate assessment orders are to be made.'
56. Let the papers of these cases be laid before the appropriate Bench withthis opinion and answer.