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Commissioner of Income-tax, Punjab Vs. Balkishan Das Hanuman Dass - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome Tax Ref. No. 18 of 1960
Judge
Reported inAIR1963P& H469; [1964]52ITR784(P& H)
ActsIncome-tax Act, 1922 - Sections 26IA; Partnership Act, 1932 - Sections 26A and 30
AppellantCommissioner of Income-tax, Punjab
RespondentBalkishan Das Hanuman Dass
Appellant Advocate D.N. Awasthy and; H.R. Mahajan, Advs.
Respondent Advocate F.C. Mittal and; A.S. Mahajan, Advs. for S.S. Mahajan, Adv.
Cases ReferredBombay v. Dwarkadas Khetan and Co.
Excerpt:
.....the vie'w that partnership was notgenuine. section 30 of the indian partnership act clearly indicates that, a minor cannot become a partner though with the consent of the adult partners he may be admitted to the benefits of partnership......to the dispute are as under. the assessee is a partnership firm consisting of six partners. the deed of partnership was executed on 16th november, 1948. out of six partners three are sons of indar lal. one of his sons balkishan das is a minor. the other three partners are sons of bansi dhar and one of his sons hanuman das was stated to be a minor on the date of the execution of the deed. it is provided in the partnership deed that each partner will be equally responsible for the profile and losses of the partnership. it is also mentioned in the deed that in case of profit each partner will be entitled to share the profit, and in case of loss eachpartner will pay his share of loss in equal shares, in the assessment year 1950-51, this deed of partnership was setup for registration of.....
Judgment:

Tek Chand, J.

1. The question which is referred to this Court for its opinion is as follows :--

'Whether on a true interpretation of the deed of partnership dated 16-11-1948 a firm had been legally constituted which was entitled to registration under Section 26-A of the Income-tax Act'?

2. The facts of this case giving rise to the dispute are as under. The assessee is a partnership firm consisting of six partners. The deed of partnership was executed on 16th November, 1948. Out of six partners three are sons of Indar Lal. One of his sons Balkishan Das is a minor. The other three partners are sons of Bansi Dhar and one of his sons Hanuman Das was stated to be a minor on the date of the execution of the deed. It is provided in the partnership deed that each partner will be equally responsible for the profile and losses of the partnership. It is also mentioned in the deed that in case of profit each partner will be entitled to share the profit, and in case of loss eachpartner will pay his share of loss in equal shares, in the assessment year 1950-51, this deed of partnership was setup for registration of the firm under Section 26-A. TheIncome-tax Officer by his order dated the 21st February 1952 declined the registration. The assessee was also unsuccessful in his appeal before the Appellate Assistant Commissioner of Income-tax who agreed with the Income-tax Officer and expressed the vie'w that partnership was notgenuine.

The assessee then went up in appeal, to the Income-tax tribunal and by its order, dated the 18th August 1954, me appeal was allowed. The Tribunal placed reliance on Jakka Devayya and Sons Tenali v. Commissioner of income-tax, Madras : [1952]22ITR264(Mad) , and P. Vincent v. Commissioner of Income-tax, Madras : [1952]22ITR285(Mad) . This Court had taken a different view in Banka Mal Lajja Ram and Co. v. Commissioner of income-tax. Delhi . The Tribunal expressed the view that in the Punjab case the question of the minor having been admitted to the benefits of the partnership had not been raised and the Tribunal had found as a fact that the minor had become a full partner. In our view the decision of this court in ought to have been applied and could not be distinguished. It is provided by Section 30 of the Indian Partnership Act that a person who is a minor may not be a partner In a firm, but, with the consent of ail the partners for the time being, he may be admitted to the benefits of partnership. The clear language of the deed of partnership infringes the provisions of Section 30 of the Indian partnership Act.

The controversy between this Court and the Madras High Court has now been completely set at rest by a decision of the Supreme Court in Commissioner of Income tax, Bombay v. Dwarkadas Khetan and Co. ILR (1961) 41 528: AIR 1961 SC 680. Their Lordships of the Supreme court after noticing the cleavage of opinion among the High Courts on this point agreed with the view expressed by this Court In the case of Banka Mal Lajja Ram and Co. . The Bombay, Madras and Patna High Courts have held that where a minor was admitted as a full partner by adult partners, the document could be registered after interpreting it to mean that we minor had been admitted to the benefits of partnership and not as a full partner. The Calcutta, Allahabad and Punjab High Courts have taken a contrary view. Their Lordships of the Supreme Court are of the view that the law requires an partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. Section 30 of the Indian Partnership Act clearly indicates that, a minor cannot become a partner though with the consent of the adult partners he may be admitted to the benefits of partnership. In view of this exposition of the law any document beyond this section cannot be regarded as valid for the purpose of registration. Their Lordships further observed that registration can only be granted of a document between the persons who were parties to it and on the covenants set out in it. If the income-tax authorities registered the partnership as between the adults only contrary to the terms of the document, a nex contract is made out. It is not open to the Income-tax authorities to register a document which is different from the one actually executed and asked to be registered. Their Lordships rejected the reasoning of the Madras High Court.

The decision of the Supreme Court concluded the matterunder reference. In the light of the decision of the SupremeCourt which had accepted, the Punjab view in the case ofBanka Mal Lajja Ram and Co. the question referred to this, Court cannot outbe answered in the negative. We would, therefore, answerthe question as follows:--

'On a true Interpretation of the deed of partnershipdated the 16th November 1948 a firm had not been legallyconstituted which could be entitled to registration under Section 26A of the Income-tax Act'

In the circumstances of this case, however, we leave theparties to bear their own costs.

P.D. Sharma, J.

3. I agree.


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