Harbans Singh, J.
(1) This is a reference made by the Income-tax Appellate Tribunal in pursuance of the order of this Court in Income-tax Case No. 12 of 1960, dated 24th of May, 1961.
(2) The facts giving rise to this reference may briefly be stated as under: A partnership deed was executed by four persons, namely, Ghungar Mal and three others, constituting a partnership firm named as Ghungar Mal Amar Chand. One Bigram Prakash minor was admitted to the benefits of the partnership. The four partners and the minor were to have one-fifth share each in the profits while the losses were to be borne by the four contracting partners in equal shares. This partnership was to carry on the business of six existing concerns and it was further provided that 'the partnership business may enter into partnership with other person or persons and may close any of the partnership concerns with the consent of other partners.' (Section Ex. 'B' at p. 6 of the printed paper-book).
Later, a partnership was entered into between this firm on the one hand and an individual named R. B, Jodha Mal on the other on 22nd of February, 1951 According to this partnership deed (Ex. 'A' at p. 4 of the printed paper-book) this firm was to be named as R. B. Jodha Mal Ghungar Mal (hereinafter referred to as the new firm or firm) and the profits and losses were to be divided equally between the parties. This was signed by Jodha Mal and Ghungar Mal--the latter purporting to sign by Ghungar Mal Amar Chand (hereinafter referred to as the smaller firm). Later, on 28th of January, 1958, an application was made by the new firm to the Income-tax Officer, Special Circle, Ambala, under S. 26-A of the Indian Income-tax Act for the registration of the firm. In paragraph 2 it was stated as under:
'The original instrument of partnership under which the firm is constituted specifying the individual shares of the partners, together with a copy, is enclosed. The prescribed particulars are given in the schedule below.'
This was signed by Jodha Mal and the four major partners of the smaller firm. In the schedule it was mentioned that Jodha Mal was to get 8-anna share in a rupee of profits or losses and the smaller firm was to get the remaining 8--anna share. A note was given that Messrs Ghungar Mal Amar Chand is a partnership and its 8-anna share is divisible amongst its four named partners and Bikram Prakash minor in equal shares, except that the minor was to share only in profits.
The registration was refused by the Income-tax Officer and the appeal filed by the firm was dismissed by the Appellate Assistant Commissioner. Before the Income-tax Appellate Tribunal, there was a difference of opinion between the Judicial Member and the Accountant-Member. The Judicial Member was of the view that the registration of the firm was rightly refused while the Accountant Member was of the contrary view. On the matter being referred to a third member, Mr. S. C. Manchanda (as he then was), he agreed with the view of the Judicial Member and thus, the appeal filed by the new firm before the Income-tax Appellate Tribunal was also dismissed.
(3) The reference made by the Income-tax Appellate Tribunal is in the following words:--
'Whether, in the facts and circumstances of this case, the assessee firm was entitled to registration under Section 26A of the Income-tax Act.'
(4) It was not disputed before us that there can be no legal partnership between an individual on the one hand and a firm as such on the other. It was further agreed that although a firm as such could not enter into such an agreement, there was no prohibition in all the individual partners of a firm entering into partnership with another individual. Thus, if the deed of partnership of the new firm, in the present case, he had been signed by all the major partners of the smaller firm and the deed had further specified the shares of all the partners, there would have been no difficulty and the new firm would have been entitled to registration. In the present case, the partnership deed suffers from three defects; First, it is not signed by all the partners; secondly, it does not specify the shares of each of the partners and thirdly, it does not mention that the minor had been admitted into the partnership.
The argument of the learned counsel, who appeared for the assessee firm before us, was that although the partnership deed is signed only by Ghungar Mal, it is clear that he signed the same for and on behalf of the smaller firm and it should, therefore, be taken that, in effect, he has signed the document for an behalf of all the four individual partners of this smaller firm. He further stated that in the application filed by the new firm under Section 26-A of the Indian Income-tax Act as well as in the original partnership agreement, under which the smaller firm was formed, the shares of the partners in the smaller firm have been specified, and that, consequently, the partnership deed of the year 1951 should be read together with these two documents, and if this is done, the requirements of the law are fully compiled with.
(5) In the first place, there is nothing on the record to establish that Ghungar Mal had any express authority to enter into this new partnership on behalf of the other three major partners. It is obvious that he could not in any case bind the minor. The minor could have been admitted into the new partnership after the same had been formed or if there was a specific provision to the effect in the deed. It was conceded that under Section 19 of the Partnership Act, there is no implied authority in a partner to enter into another partnership on behalf of the firm. The learned counsel, however, urged that there was a specific authority in this behalf which can be spelt out from term No. 4 of the partnership deed of 1948. It appears that before the Income-tax Appellate Tribunal, the assessee firm had not taken up the position because it is clearly stated in the judgment of the Judicial Member at page 24 (line 18) of the paper-book as follows:
'* * * * * it is not the assessee's case that he had any such special power of attorney or authorization from his co-partners of the smaller firm.'
However, even if this point is allowed to be taken, term 4, (reproduced earlier) that is relied upon, does not give any express authority, to any of the partners to enter into any other partnership. This term only gives the scope of the business of the smaller firm. It was stated that the firm was to carry on six concerns specifically mentioned and that it could be also extend its business by entering into further partnership/partnerships. I am, therefore, of the view that there is no express authority in the partnership deed of 1948 giving Ghungar Mal or any other partner any authority to enter into partnership on behalf of the smaller firm.
(6) Apart from this, the law requires that the shares of the individual partners must be specified in the instrument by which the partnership is formed. Sub-section (1) of Section 26-A of the Act is in the following terms:
'Application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration * * * * *.' The argument was that a partnership need not be constituted by one single instrument but the same can be constituted by a set of instruments, and in order to find out the terms of the partnership, all these instruments must be looked at. The learned counsel cited an instance where the partners execute a document giving only some to the terms of which partnership is entered into and the remaining terms are contained in an instrument executed subsequently. He urged that the word 'instrument' as used in section 26-A, will include both these instruments which together constitute a partnership. In support of this, he referred to a Full Bench case of the Bombay High Court reported in Chhotalal Devchand v. Commissioner of Income-tax, Bombay City II, Bombay : 34ITR351(Bom) . It is not necessary to say anything with regard to this matter because the present case is not of this type. Here, the partnership is constituted by the instrument of 1951, which is a complete instrument so far as it goes. Jodha Mal of the first part and the firm being of the other part, were the two contracting parties. Each was to get 8-anna share in a rupee both in profits as well as losses.
Other terms of the working of the partnership are also laid down. No other document is mentioned are incorporated, by cross-reference.
What the learned counsel wants us to do is to refer to the earlier document of 1948 by which the smaller firm was formed and to read into the partnership of 1951 the terms specifying the shares of the individual partners of the smaller firm as given in that earlier deed. Obviously, this cannot be done because this would run counter to the clear wording of the section which provides that the shares of the individual partners must be specified in the instrument, which creates the partnership.
By no stretch of imagination can it be argued that the instrument of 1948 in any way creates the new partnership. It is only the instrument of 1951 which does so and that, in no way, specifies the shares of the five individual partners who formed the smaller firm. This is also the view taken by their Lordships of the Supreme Court in Dulichand v. Commr. of income-tax, Nagpur : 29ITR535(SC) . That was a case where an agreement was entered into between three partnership firms, which were individually constituted under three separate deeds, one joint Hindu family firm and one individual. The deed of partnership was signed by one of the partners of each of the firms on behalf of their respective firms, by the karta of the joint Hindu family and by the individual concerned. The application for registration was also signed by the same five persons. The main argument centered round the question as to whether the firm as such can be a partner in another firm and this was answered in the negative. The alternative argument addressed by the appellant and the answer given by the Supreme Court at page 358 of the report may, with advantage, be reproduced:
'The learned advocate for the appellant then urges that, at any rate, the partnership was not illegal, for there was no legal impediment in the way of all the members of all the three constituent firms and the karta of the Hindu undivided family and the individual entering into an agreement and that, therefore, a valid partnership was constituted by the deed of partnership under consideration. Assuming that this contention is possible in view of the language which has been used in this deed for describing the parties, the position of the appellant will not improve, for, in order to be entitled to the benefit to registration under the Act, it will have to be shown that the shares of all individual partners are specified in the deed . . . . . . . . . The deed specifies that each of the five constituent parties is entitled to an equal, i.e. , 1/5 share but it does not specify the individual shares of each of the partners of each of the three smaller constituent firms.'
The contention on behalf of the petitioner in the present case is exactly the same as the one advanced by the learned counsel for the appellant in the case before the Supreme Court. At best it can be argued that in view of the signature of Ghungar Mal being for and on behalf of the smaller firm, all the partners of the firm should be taken to have entered into agreement for partnership. But the real trouble is that, according to Section 26-A of the Act, the shares of the individual partners have to be specified in the instrument itself. That being absent, the firm is not entitled to be registered under the aforesaid section. The case of the petitioner seems to be fully covered by this pronouncement of the Supreme Court. As already indicated, Bombay case, which was decided after this Supreme Court case, was based on different facts, but the observations made therein that order documents can be looked into, have been dissented from by other Courts. See in this respect Guruswami Chettiar v. Commissioner of Income-tax, Madras : 48ITR692(Mad) wherein a Division Bench of the Madras of High Court dissented from Chhotalal Devchand's case : 34ITR351(Bom) of Bombay High Court and followed an earlier Full Bench case of their own Court reported as Kanniappa Naicker and Co. v. Commissioner of Income-tax : 5ITR49(Mad) . The relevant part of the head-note in Kanniappa Naicker's case : 5ITR49(Mad) reads as follows:
'A partnership cannot be registered as a firm under Section 26-A of the Indian Income-tax Act, where the instrument of partnership does not specify on the face of it the individual shares of the partners. Therefore, where a partnership consists of a firm and some individuals and the deed of partnership, while mentioning the proportion in which the profits and losses are to be shared between the firm and the other partners respectively, does not specify the shares of the partners of the firm which is a member of the partnership, the partnership cannot be registered as a firm under Section 26-A. The fact that the smaller partnership is also a registered firm and in the deed constituting that partnership the shares of its partners are specified is immaterial.' In Kylasa Sarabhaiah v. Commissioner of Income-tax : 46ITR470(AP) a Division Bench of the Andhra Pradesh High Court was dealing with a case (more or less similar to the one before us) where A and B, with five minor members admitted to the benefits of the partnership, constituted the firm AB. A new firm was formed between this firm Ab and the individuals C and D, and the partnership deed was stated in the behalf of the firm AB had a 9-anna share in which A and B has half share each. The shares of C and D were also specified. Notwithstanding the fact that the partnership AB was constituted by A and B with the minor brothers admitted to its benefits, whose names were also detailed, it was held that:
'(i) As the partnership expressly purported to be a partnership between the firm AB as such and C and D, it was not legally a firm under the Indian Partnership Act or under the Indian Income-tax Act. The partnership could not be construed as a partnership between A and B as individuals, and C and D, as it was specifically stated in the deed that the first partner was the firm AB and A had signed the deed on behalf of the firm:
(ii) the registration should be disallowed also because the shares of the partners were not specified in the instrument of partnership itself.'
Kanniappa Naicker's case : 5ITR49(Mad) was followed and, while distinguishing Chhotalal Dev Chand's case : 34ITR351(Bom) , it was observed as follows at p. 482 of the report:
'What . . . . . . . . was decided by the High Court of Bombay . . . . . . . . . . was only that an instrument of partnership should be constituted by one or several documents and that what Section 26-A requires is only that the documents which constitute the instrument of partnership must specify the shares of the partners and that it is not necessary that the shares must be specified in one document along with the other terms of the partnership. If this decision intended to hold that, in order to ascertain the individual shares of several partners, it is permissible to refer to the earlier deed of partnership, we must express our respectful dissent from it.'
I am respectful agreement with the view taken by the Madras and Andhra Pradesh High Courts and I feel that in view of the clear pronouncement of the Supreme Court, the instrument constituting, the partnership, must, on the face of the specify the shares. In the present case, deed of 1951, does not even given an indication as to who the partners of the smaller firm were, what to say of specifying their respective shares in the new firm, and for this purpose reference cannot be made to the earlier deed of 1948. The view taken by the two Judicial Members of the Tribunal, therefore, is correct and the answer to the reference must be in the negative. The respondents will have their costs from the assessee firm. Counsel fee Rs. 250/-.
D. Falshaw, C.J.
(7) I agree.
(8) Reference answered in negative.