The following questions :
'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the firm was not entitled to grant of registration for the assessment year 1960-61 and renewal of registration for the assessment year 1961-62 under section 26A of the Income-tax Act, 1922 ?'
Has been referred to us by the Income-tax Appellate Tribunal, Madras Bench.
The finding entered by the Income-tax Appellate Tribunal on the basis of which registration was refused is in these terms : 'The absence of any explanation on this important point, taken together with the other discrepancies between the original and the duplicate accounts, justifies the inference that in fact Smt. Elizabeth Joseph was not a partner of the firm nor has she contributed any share capital to the firm. It follows that the firm which applied for registration on the strength of the partnership deed dated July 1, 1958, was not in existence at all.'
Based on this finding-and there is no reason why we should not accept that finding, for this is not a case of no evidence to support that finding-it is easy to answer the question and the answer should be in the affirmative, that is, in favour of the department and against the assessee, for rule 6A of the Income-tax Rules, 1922, clearly indicates that before registration can be granted there should have been a firm proved to be in existence.
Counsel for the assessee, however, has tried to equate this finding to one where it has been held that the daughter-in-law of the assessee, Smt. Elizabeth Joseph, is a benamidar for the assessee, one Mr. Ouseph. On that basis it is urged by him that there is no impediment in the law of partnership or the general law of India which prevents one of the partners being a benamidar for another and it is said that this is so even in cases where that other happened to be a partner. Reliance for this proposition has been placed on a decision of the Calcutta High Court in Nurul Hasan v. Amir Hasan. We are not prepared to say that there are no passages in the judgment which would support this contention. But it is clear that the decision itself turned on a matter which has nothing to do with the question arising for determination before us.
The case before us is one in which there are only two partners. This specific point, as we find, has been adverted to by the Supreme Court and their Lordships have also expressed an opinion though they have clarified that is not their final opinion. The passage is in the decision in Commissioner of Income-tax v. Abdul Rahim and Co. and runs thus :
'It is true that different considerations may arise, if the partnership is only between two persons of whom one is a benamidar of the other. In that event the partnership may be bad not because the benamidar has no power to enter into the partnership but because a partnership in law is the relationship between at least two persons and in the case of a benamidar and the real owner in fact there is only one person. It may also be that in a case where a benamidar is taken as a partner with the consent of the other partners, he will only be a dummy. We do not propose to express any final opinion on the said two questions as they do not arise in this appeal.'
There must be at least two persons to form a partnership and when there are only two persons and one of them is a benamidar for the other, it is impossible to view them as two different persons for the purpose of constituting a partnership.
We answer the question in the affirmative, that is, in favour of the department and against the assessee. We, however, make no order as to costs.