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Addl. Commissioner of Income-tax Vs. United Commercial Traders - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 505 of 1974
Judge
Reported in[1988]112ITR953(All)
ActsIncome Tax Act, 1961 - Sections 184; ;Income Tax Rules, 1962 - Rule 22; ;Indian Partnership Act, 1932 - Sections 30(6)
AppellantAddl. Commissioner of Income-tax
RespondentUnited Commercial Traders
Appellant AdvocateA. Gupta, Adv.
Respondent AdvocateK.B. Bhatnagar, Adv.
Cases ReferredJagan Nath Pyare Lal v. Commissioner of Income
Excerpt:
- - saroj gupta having endorsed the partnership deed no fresh partnership deed was required to be executed......a deed of partnership dated april 1, 1966. out of the nine partners mentioned in the deed, smt. saroj gupta was a minor. she was admitted to the benefits of partnership with effect from the aforesaid date. she attained majority on may 10, 1966, that is, only after 40 days of her being admitted to the benefits of the partnership. on her attaining majority, no fresh deed was drawn up. she only expressed her desire to continue as a partner, as required by subsection (6) of section 30 of the partnership act, by making an endorsement under her signatures. the endorsement made by her reads as under;' i have attained majority on 10th may, 1966, and i hereby give consent of becoming a partner in the partnership business styled m/s. united commercial traders, railway road, meerut city, and.....
Judgment:

K.C. Agrawal, J.

1. The question that has been referred in this case is whether, on the facts and in the circumstances, the assessee-firm was entitled to registration within the meaning of Section 185 of the Income-tax Act, 1961 '

2. The assessee is a firm constituted under a deed of partnership dated April 1, 1966. Out of the nine partners mentioned in the deed, Smt. Saroj Gupta was a minor. She was admitted to the benefits of partnership with effect from the aforesaid date. She attained majority on May 10, 1966, that is, only after 40 days of her being admitted to the benefits of the partnership. On her attaining majority, no fresh deed was drawn up. She only expressed her desire to continue as a partner, as required by subsection (6) of Section 30 of the Partnership Act, by making an endorsement under her signatures. The endorsement made by her reads as under;

' I have attained majority on 10th May, 1966, and I hereby give consent of becoming a partner in the partnership business styled M/s. United Commercial Traders, Railway Road, Meerut City, and agree to the terms and conditions contained in this partnership deed dated 1st day of April, 1966.

Sd. Smt. Saroj Gupta.'

The assessee-firm, thereafter, filed an application under Section 184 of the Income-tax Act, along with the deed of partnership dated April 1, 1966, for registration of the firm for the assessment year 1967-68 (the accounting period of which was from April 1, 1966, to March 31, 1967). The application for registration was signed by all the partners, including Smt. Saroj Gupta.

3. The Income-tax Officer refused to register the same on two grounds : firstly, that as no fresh deed was drawn up on Smt. Saroj Gupta attaining majority on May 10, 1966, the assessee-firm was not entitled to get the registration, and, secondly, that the shares of profits and losses of all the partners, including Smt. Saroj Gupta, were not specified in the partnership deed dated April 1, 1966. On appeal, the Appellate Assistant Commissioner did not go into the question of the shares of profits and losses having not been specified in the partnership deed, but held that the refusal of registration by the Income-tax Officer was invalid as in his view Smt. Saroj Gupta having endorsed the partnership deed no fresh partnership deed was required to be executed. Feeling aggrieved by the order of the Appellate Assistant Commissioner, the Income-tax Officer filed an appeal to the Income-tax Appellate Tribunal (Delhi Bench), In the view of the Tribunal, the endorsement dated 10th May, 1966, on the deed constituted the execution of a new instrument of partnership and, therefore, the assessee-firm was entitled to get the registration. As regards the plea that the profits and lossess were not specified in the partnership deed, the Tribunal held that since the losses were to be borne by two of the adult partners alone, there was nothing to prohibit the assessee-firm from obtaining the registration. It was, thereupon, that the Income-tax Officerfiled an application under Section 256(1) of the Act for reference being made to this court. The same was allowed. Hence, this reference.

4. Section 184 of the Income-tax Act, 1961, lays down the conditions of registration and provides that an application for the said purpose will have to be made by an assessee to the Income-tax Officer on behalf of the firm. Sub-section (5) of the said section requires that an application shall be accompanied by the original instrument evidencing the partnership, together with a copy thereof. Rules 22 to 25 deal with the registration of firms. According to Rule 22, application for registration of a firm for the purposes of this Act shall be made in accordance with the provisions of Sub-rules (2) to (5). In the instant case, the application for registration was made by the firm in accordance with Clause (i) of Sub-rule (2) of Rule 22 in Form 11. The said form was signed by all the partners, including Smt. Saroj Gupta.

5. The argument of the learned counsel for the revenue was that registration under Section 184 can be given to a firm only when a partnership deed executed between all the partners was filed along with an application filed for the said purpose and as, in the instant case, admittedly, Smt. Saroj Gupta was not a party to the partnership deed, having not executed the same, the assessee-firm was not entitled to registration. According to the submission of the learned counsel, the endorsement made by Smt. Saroj Gupta on the partnership deed to the effect that she had opted to become a partner of the firm was not sufficient in law to entitle the firm to get the registration inasmuch as the said endorsement could not fulfil the requirements of law. The submission was controverted by the learned counsel for the assessee-firm. It was emphasised by the learned counsel that the fact that Smt, Saroj Gupta had made her endorsement on the partnership deed and had further signed Form 11, the same was sufficient in law to entitle the assessee-firm to get the registration.

6. After having heard the arguments of the learned counsel for the parties, we are of the opinion that the submission advanced on behalf of the department cannot be accepted. There is nothing in Section 184 or Rule 22 of the Rules Iramed thereunder showing that the partnership deed should be signed by all the partners. What is required to be established for the claim of registration is that a partnership existed between the persons named therein. If the agreement had not been signed by one or more of the partners, but those not making the signatures assent to the agreement and join the other partners in applying and signing the application for registration, the firm would be entitled to get the same. There is no denial that the existence of partnership will not be presumed, but must be proved. Where a partnership deed signed by all the partners is not available, theexistence of a partnership deed may be proved by transactions and declarations. In the instant case, as already mentioned above, Smt. Saroj Gupta had made an endorsement on the deed indicating expressly that she had accepted to be a partner. This endorsement, in our opinion along with the application for registration to the Income-tax Officer in Form 11, showed her and other partner's consent and established the partnership between herself and other persons mentioned therein.

7. In a case, In re Ram Lal Murli Dhar : AIR1931Cal682 , a Special Bench of the Calcutta High Court held as follows :

' Though under Section 2(14) a firm to be registered must be a firm constituted under the instrument, it is not implied thereby that in order to satisfy the requirement of the firm being constituted under the instrument a complete instrument only is intended to be valid for registration, that is to say, an instrument which does not require supplementing by other evidence but contains in itself the complete agreement constituting the partnership and by itself solely operates to create the partnership.'

8. The observations made by Rankin C.J., who delivered the judgment of the court, were that it was not impossible that a firm could be constituted under the agreement, although the agreement had not been executed by all the partners. To the same effect is the view of the Bombay High Court taken in Commissioner of Income-tax v. R. Dwarkadas and Co. : [1971]80ITR283(Bom) . It has, however, been held that, ' it is not necessary for every partner to sign the instrument of partnership, and that even though the instrument of partnership has been signed by only some of them, but if it had been assented to by the others, who had not signed it and they had joined in putting it forword along with the other partners for registration, it would be admissible for registration under the Indian Income-tax Act.' The same is the view of the Punjab High Court taken in the case of Jagan Nath Pyare Lal v. Commissioner of Income-tax .

9. We are in respectful agreement with the view taken in the aforesaid cases and hold that merely because Smt. Saroj Gupta did not sign the partnership deed that would not disentitle that assessee-firm from getting the registration.

10. In the result, we answer the question in the affirmative and against the Commissioner of Income-tax. The assessee-firm would be entitled to its costs which we assess at Rs. 200. The advocate's fee is also assessed at Rs. 200.


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