1. A short yet important question has been referred to us by the Income-tax Appellate Tribunal at the instance of the revenue. We may at the outset state a few facts even before we extract the question.
2. The assessee is a firm of lawyers, Joseph & George, and the partners have been carrying on their profession as an unregistered firm. On 10th April, 1964, they drew up a document of partnership embodying the terms and constitution of the firm, and, on the same day, they applied for registration of the firm for the assessment year 1964-65, the accounting year being from 1st April, 1963, to 31st March, 1964. Since the application for registration was not filed before the close of the previous year, an application for condoning delay was filed, the reason for the delay being that the senior partner of the firm was ill. The Income-tax Officer was satisfied about the reason ; and he consequently excused the delay. But he did not register the firm, as, in his opinion, the document of partnership was not in force during the relevant accounting year. The assessee-firm took up the matter in appeal before the Appellate Assistant Commissioner, and he took a different view on the question. He held that, since the Income-tax Officer excused the delay in filing the application for registration, he should have registered the firm as well. In the opinion of the Appellate Assistant Commissioner, under the Income-tax Act of 1961, the document of partnership need not have been in force during the relevant accounting year and it was enough if the document accompanied the application for registration. This view of the Appellate Assistant Commissioner was confirmed by the Income-tax Appellate Tribunal; and the question referred at the instance of the revenue is:
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in directing registration of the assessee-firm for the assessment year 1964-65 ?'
3. Mr. P.K. Krishnankutty Menon, the counsel for the revenue, draws our attention to the decision of the Supreme Court in R. C. Mitter & Sons v. Commissioner of Income-tax,  36 I.T.R. 194 ;  Supp. 2 S.C.R. 641 (S.C.)., where the Supreme Court considered Section 26A of the Income-tax Act of 1922 and the relevant rules regarding registration of firms. The counsel brings to our notice the subsequent decision of the Supreme Court in N. T. Patel & Co. v. Commissioner of Income-tax,  42 I.T.R. 224 ;  1 S.C.R. 251 (S.C.)., where also the Supreme Court affirmed their earlier decision in Mitter's case. The counsel contends that in Mitter's case the Supreme Court laid down in clear terras that the partnership document should be in force or operative during the accounting year, and that that position has not been changed by the amendment of the law by the Income-tax Act of 1961. On the other hand, Mr. Varghese KalKath argues on behalf of the assessee that the decision in Mitter's case was under the Income-tax Act of 1922, the relevant provisions of which have been substantially modified by the Act of 1961, so that that decision is no more good law and not applicable to registration of firms under the new Act. The counsel elaborates his argument saying that the decision in Mitter's case was based on the wording of Section 26A of the Income-tax Act of 1922, and since the language has been substantially modified by the Act of 1961, the decision does not apply; according to him, the decision 'stemmed from the language' of the earlier section (Section 26A), which will not, therefore, be applicable to the language of the new section.
4. The expression used in Section 26A of the Act of 1922 was 'any firm constituted under an instrument of partnership' while the language of Section 184(1)(i) of the Act of 1961 is 'a partnership is evidenced by an instrument'. The Supreme Court considered the meaning of the expression 'partnership constituted under the instrument' and contrasted that expression with the other expression 'partnership constituted by the instrument'. The Supreme Court held that a partnership constituted by an instrument took its origin from, or came into existence as a result of the document, while a partnership constituted under an instrument need not be so : a partnership, which was orally constituted and the terms of which were embodied in a subsequent document executed on a subsequent date, would also satisfy the requirement of a partnership constituted under the instrument. The Supreme Court considered two lines of decisions, one represented by Dwarkadas Khetan & Co. v. Commissioner of Income-tax,  29 I.T.R. 903 (Bom.)., where Chagla C.J. of the Bombay High Court spoke for the court and the other represented by R. C. Mitter & Sons v. Commissioner of Income-tax,  28 I.T.R. 698 (Cat.)., decided by the Calcutta High Court, where Chakravartti C. J. delivered the opinionof the court. (The case before the Supreme Court was an appeal against the decision of the Calcutta High Court.) In the Bombay case, Chagla C.J. took the view, that a partnership constituted under a document need not necessarily have its origin in the document itself, while Chakravartti C.J. took a different view in the Calcutta case. Considering these two lines of cases, the Supreme Court came to the conclusion that the expression 'under the document' was different from the expression 'by the document' and that the former meant that the partnership need not have been constituted or created by the document itself.
5. The argument of the counsel for the assessee may now be scrutinised. The counsel argues that the change in the language of the section [Section 184(1)(i)] is clear that the legislature wanted to change the effect of the decision of the Supreme Court in Mitter's case; that is why the language used in the new section is ' partnership is evidenced by an instrument'. The question for us to consider is whether this was the intention of the legislature in using a new language in the new section. The conclusion of the Supreme Court with which we are concerned in this connection is not so much the meaning of the expression 'partnership constituted under a document'; the relevant question is whether the instrument of partnership should be operative during the previous year. The Supreme Court observed in Mitter's case :
'As a result of the above discussion, the conclusion is reasonably clear that unless the partnership business was carried on in accordance with the terms of an instrument of partnership which was operative during the accounting year, it cannot be registered in respect of the following assessment year.'
6. This conclusion of the Supreme Court was not based on the language of Section 26A of the old Act. This was based on the rules framed under the old Act; and that fact is clear from the following passage at page 199 of the report. The Supreme Court said:
'The Rules, thus, contemplate a document operative during the accounting year. We are not here concerned with the further question whether the document should be in existence at the very inception of the accounting year, or before the year is out.'
7. From the first sentence extracted above it is clear that the aforesaid conclusion was reached by the Supreme Court on the interpretation of the relevant rules, and not on the language of Section 26A. In this decision itself, Hidayatullah J. (as he then was) wrote a separate but concurring judgment which may also be relevant in this connection. The learned judge said:
'I entertain, however, some doubt as to whether the instrument sought to be registered should be in existence in the accounting year, before registration can be claimed. There is nothing in the Act which says this specifically. My brother has reasoned from the contents of the Act and the rules that such a condition is implied.'
8. We are extracting this passage from the judgment of Hydayatullah J. not for agreeing with the doubt expressed by his Lordship in preference to the majority opinion, but only to confirm that the conclusion reached by the majority was based not on any specific provision in the Act of 1922, but on the language of the' relevant rules framed under it. It must then follow that the change in the language of the section could not have altered the effect of the ruling of the Supreme Court.
9. The relevant rules framed under the Act of 1922 were Rules 2 and 3, and they, inter alia, provided, in the language of the Supreme Court, 'that the application has to be made before the assessment is completed and for a particular assessment year'. It is mainly from this provision that the Supreme Court came to the conclusion that the instrument of partnership must be operative during the accounting year. The Supreme Court also relied on Section 28(2} of the Act of 1922 to reach this conclusion. We, therefore, reiterate that this conclusion of the Supreme Court was not based on the language of Section 26A as such. Rules 2 and 3 now find their place in the new Act itself. Section 184(4) enacts that the application shall be made before the end of the previous year for the assessment year in respect of which registration is sought; and Section 184(5) provides that the application shall be accompanied by the original instrument evidencing the partnership. The proviso to Sub-section (4) provides that the Income-tax Officer may entertain an application made after the end of the previous year, if he is satisfied that the firm was prevented by sufficient cause from making the application before the end of the previous year. Thus, Sub-section (4) of Section 184 now embodies the relevant provisions of Rules 2 and 3 framed under the old Act; and these provisions are still intact with equal force if not more force as they are now in the Act itself. Therefore, the observation of the Supreme Court first extracted hereinbefore is still good; and we may add that the change in the language of Section 184(1)(i) of the new Act must obviously have been to use clearer and uncontroversial language to accord with the ruling of the Supreme Court in Mitter's case.
10. Now, the Supreme Court held in Mitter's case that the document should be operative during the accounting year. However, the Supreme Court did not consider further whether the document should be in existence at the very inception of the accounting year, or before the year, was out. From the language of Section 184(4) and Section 184(5), we are of opinion that thedocument need not be operative during the whole year. Sub-section (4) enacts that the application shall be made before the end of the previous year; therefore, if the application is made even on the last day of the accounting year, the firm must be registered for the next assessment year. For registering the firm, Sub-section (5) says, the application for registration shall be accompanied by the document of partnership: this means that the document should be in force on the day on which the application is made : it need not be in force on any previous day : of course, the partnership should have been in existence for the whole of the accounting year. This is our opinion on the question left open by the Supreme Court.
11. In conclusion, we may add that, if this is not the correct interpretation, the consequence will be fairly far-reaching. The power of the Income-tax Officer under the proviso to Sub-section (4) of Section 184 is only to entertain an application made after the end of the previous year and to excuse the delay in presenting that application. His jurisdiction does not extend beyond this : and if the contention of the assessee-firm in this case is accepted, the result will be that the delay in drawing up or executing the partnership document can also be excused by the Income-tax Officer, which, in our opinion, the law does not contemplate. The error committed by the Appellate Assistant Commissioner and the Appellate Tribunal in this case lies in not properly appreciating the power of the Income-tax Officer to excuse delay, We reiterate that the power is only to excuse the delay in filing the application for registration and not to excuse the delay in drawing up the document of partnership itself.
12. Therefore, our answer to the question referred is in the negative, namely, that the Appellate Tribunal was not right in law in directing registration of the assessee-firm for the assessment year 1964-65 ; the answer is thus against the assessee. However, we do not pass any order regarding costs.
13. A copy of this judgment will be sent to the Appellate Tribunal.