I. N. MODI J. - This is a reference by the Income-tax Appellate Tribunal, Delhi Bench 'B', under section 66(1) of the Indian Income-tax Act, 1922.
The question referred to us reads as follows :
'Whether the Tribunal was right in law in upholding the Income-tax Officers order and refusing to renew registration for the assessment year 1956-57 on the ground that Om Prakashs signature to the application was a mandatory requirement, as he had attained majority ?'
The facts leading up to this reference are shortly these : The assessee is a firm consisting of two partners, Tirkha Ram and Nandlal, which came into existence by a partnership deed dated the 20th January, 1951. One Om Prakash, a minor, was also admitted to the benefits of the partnership, and it was agreed between Tirkha Ram and Nandlal that after giving 10% of the benefits to the minor, Om Prakash, they would divide the remaining profits in certain proportions and that, should losses occur in the business of the partnership, the minor shall not be responsible for the same. The firm had applied for registration under the Income-tax Act for the first time during the assessment year 1950-51 and had obtained renewal thereof for the succeeding years 1950-51 to 1955-56. The relevant assessment year for the purpose of the present reference is 1956-57, the corresponding accounting year being April 2, 1955, to April 17, 1956. It is admitted that the minor, Om Prakash, attained majority on the 5th September, 1955. An application for renewal of the registration with respect to this partnership for the year 1956-57 was made on the 15th June, 1956. This application was signed by the two partners, Tirkha Ram and Nandlal, only and although Om Prakash had become a major on the 5th September, 1955, it did not bear his signatures. The Income-tax Officer refused registration for the year in question on the ground that as Om Prakash has become major and he had not opted to go out of the firm, he must be treated as having elected to have become a full-fledged partner and, that being so, the application for renewal must have been signed as much by him as by the two partners under section 26A of the Act read with rule 6 made under section 59 thereof. In this view of the matter the application for registration having been refused by the Income-tax Officer, the assessee appealed to the Appellate Assistant Commissioner against the order of the Income-tax Officer, who seems to have taken a somewhat different view of the want of the signature of the third partner, Om Prakash, on the application for registration, though for another reason he came to the same conclusion. According to the Appellate Assistant Commissioner, even though the application for renewal of registration must have been signed by all the partners personally, the Income-tax Officer was still bound to examine whether the defect was of a curable nature or not, and in that view of the matter he observed that ordinarily he would have sent back the case to the Income-tax Officer, but as the assessment cases of this firm for the year 1956-57 as well as for 1957-58 were before him at the same time, and as the statement of account filed by the assessee-firm for the year 1957-58 did not indicate that any profits or losses had been divided between all the partners including Om Prakash, he felt persuaded to hold that Om Prakash was not a genuine partner at all in the firm in question, and on this ground he held that the application made by the firm was defective and dismissed the appeal. The assessee then went up in further appeal to the Appellate Tribunal. The learned Members of the Tribunal did not agree with the view taken by the Appellate Assistant Commissioner set our above, but dismissed the assessees appeal for the assessment year 1956-57 holding that the want to signature of Om Prakash on the application for registration for that year was a defect which was fatal to the application under section 26A, read with rule 2 of the relevant Rules and, consequently, the application for registration was dismissed.
It is in these circumstances that the question set out in the forgoing part of our judgment has been referred to us for answer by the Tribunal. Section 26A of the Act reads as follows :
'Procedure in registration of firms. - (1) 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 for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax.
(2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed.'
Rule 2 of the Rules, in so far as it is material for our purpose, reads as under :
'Any firm constituted under an instrument of partnerships specifying the individual shares of the partners may, under the provisions of section 26A of the Indian Income-tax Act, 1922 (hereinafter in these rules referred to as the Act), register with the Income-tax Officer, the particulars contained in the said instrument on application made in this behalf.
Such application shall be signed by all the partners (not being minors) personally, or in the case of a dissolved firm by all persons (not being minors), who were partners in the firm immediately before dissolution and by the legal representatives of any such partner who is deceased.....
(c) where the application is for renewal of registration under rule 6 for any year, before the 30th day of June of that year :
Provided that the Income-tax Officer may entertain an application made after the expiry of the time-limit specified in this rule, if he is satisfied that the firm was prevented by sufficient cause from making the application within the specified time.'
Rule 6, which relates to renewal is in the following terms :
'Any firm to whom a certificate of registration has been granted under rule 4 may apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year. Such application shall be signed personally by all the partners (not being minors) of the firm... The application shall be made before the 30th day of June of the year for which assessment is to be made provided that the Income-tax Officer may entertain an application made after the expiry of the said date, if he is satisfied that the firm was prevented by sufficient cause from making the application before that date.'
It is in this state of law that the question falls for determination as to whether the requirement that the application for registration or renewal thereof shall be signed by all the partners of the firm seeking registration, not being minors, is mandatory or not. It is strenuously argued by the learned counsel for the assessee that this requirement is only directory and that what the Income-tax Officer under section 26A of the Indian Income-tax Act has to see is whether the partnership firm is a genuine one, and the moment he is so satisfied, the want of signatures of one of the persons on such application should not stand in the way of the firm being registered under this provision, provided the other necessary requirements of that section are fulfilled. The learned counsel has not been able to cite before us any authority for the view propounded by him. Be that as it may, on a careful and anxious consideration of the controversy which has been raised before us, we have not found it possible for us to accede to this view. The principal reason for the view to which we are inclined to come is the language of rule 2 itself, which says in unmistakable words that an application for registration shall be signed by all the partners, not being minors, personally. Further, the requirements of an application for renewal of registration under rule 6 are precisely the same. The important words in these rules are (1) 'all the partners' and (2) 'personally'. That being so we cannot but hold that an application for registration to be competent must be signed by all the partners of the firm and not by only a majority or some of them and, further, it must be signed by each of the partners himself and not through the instrumentality of any agent of his in spite of the fact that he may have been expressly authorised to do so. There have been a number of decisions of the other High Courts and even of the Supreme Court for the view that the partners must sign the application for registration personally, i.e., by themselves and that this requirement of the rule is mandatory.
In Koduri Sambasivadu & Sons v. Commissioner of Income-tax it was held that an application for registration of a firm under section 26A of the Income-tax Act, 1922, must be signed by all the partners themselves and that the statutory provisions did not permit any agent signing on behalf of all the partners, and this requirement of the rule was mandatory. In this case only four of the partners had signed personally but the fifth had not signed, and for this fifth partner another partner, who held a general power of attorney from him, had signed. It was held that the Income-tax Officer was right in refusing renewal of registration.
Again in Greenfields v. Commissioner of Income-tax an application for renewal of registration was rejected because it had not been signed personally by one of the partners and it was held that the law was firmly settled that the provisions of rule 6 with regard to the personal signatures of the partner was of a mandatory nature and must be strictly complied with. In coming to this conclusion it was observed that the application for registration of a firm under section 26A of the Income-tax Act was not a matter of right which was vested in a firm, but was a privilege given to it in order to enable individual partners to get the benefit of lower rates of assessment application wherever such rates were lower than the rate applicable to the total income of the partnerships computed as a whole. We are in respectful agreement with this view and fell disposed to add that in order to entitle itself to such a privilege the firm concerned should strictly comply with the conditions laid down for securing such a privilege, unless those are relaxed by the statute itself. This view, in our opinion, receives strong support from certain itself. This view, in our opinion, receives strong support from certain decisions of our Supreme Court to which we will now respectfully refer.
In Rao Bahadur Ravulu Subba Rao v. Commissioner of Income-tax it was held that the Indian Income-tax Act was itself a self-contained code exhaustive of the matters dealt with therein, and that in order that a firm should be given the benefit of section 23(5) (a) it must be registered under section 26A in accordance with the conditions laid down in that section and the rules frames thereunder, and that as those rules required the application to be signed by the partner in person, the signature of an agent on his behalf was invalid. It was further observed, and this is important to note, that the right to apply for registration of a firm to be determined exclusively by reference to the prescriptions laid down therein and by no other and, consequently, the signature that was prescribed being that of the partner himself, such a requirement would not be complied with by an agent signing on his behalf.
Again, the same principle seems to us to be deducible from the decision of their Lordships in Pratapmal Luxmichand v. Commissioner of Income-tax. In this case a partnership consisted of 7 members and the application for registration was signed by as many as 6 of them, the 7th being unable to sign as he was a security prisoner under the Defence of India Rules at that time. The Special Income-tax Officer, Nagpur, rejected the application both on the ground that the partnership deed itself had not been signed by all the partners mentioned in the body and, further, there was no signature of one of the partners on the application. On appeal, the Appellate Assistant Commissioner set aside the order of the Income-tax Officer, and ordered that he do register the firm after obtaining the signatures of the 7th partner both on the application for registration and the deed of the partnership. On a further appeal, the Tribunal set aside the order of the Appellate Assistant Commissioner, and held that the Income-tax Officer was justified in refusing to register the firm as the application for registration was not signed by the aforesaid partner. The matter was then taken up on reference to the Nagpur High Court, which upheld that the order of the Tribunal, and it was eventually carried to the Supreme Court. In upholding the view taken by the High Court, their Lordships held that the Appellate Assistant Commissioner had no power to direct held that the Income-tax Officer to register the firm after obtaining the signature of the 7th partner both on the application for registration and on the deed of partnership. It may be pointed out that as rule 2(c) stood at the relevant time a firm constituted under an instrument of partnership and specifying the individual shares of the partners could register with the Income-tax Officer even with the permission of the Appellate Assistant Commissioner hearing an appeal under section 30 of the Act before the assessment of the firm was confirmed, reduced, enhanced or annulled. It may be pertinent to mention here that this was a case under the rules which existed prior to 1952 and the rules were made more stringent in 1952 and these rules, as amended, did not contain any such provision. The facts of this case are somewhat difference, but it seems to us that it clearly furnishes unmistakable support for the view that an application for registration under section 26A must be signed personally by all the partners of the firm.
The last case to which we should like to refer is also one which was taken to the Supreme Court and is reported as Steel Brothers and Co. Ltd. v. Commissioner of Income-tax. Referring to rule 2 of the Act, observed their Lordships, that in order that an application for registration be entertained by the Income-tax Officer and the partnership registered for the purpose of the Act, it is necessary that the application should be signed by all the partners of the firm and should specify the individual shares of all the partners. They further laid down that unless this was done, it would not be competent to the Income-tax Officer to entertain the application and it would not be obligatory upon him to register the partnership for the purpose of the Act.
Having regard to this state of authorities, we are clearly disposed to hold the view that the requirement of rule 2 as well as rule 6 of the Rules to the effect that the application for registration or renewal must be signed by all the partners and must be signed by each one of them personally is an essential requirement for the validity of such an application having regard to the language of the rules as they stood at the relevant time, and they could not have been dispensed with by the income-tax authorities on a priori considerations.
Applying this rule to the present case the position boils down to this. The application for renewal for the relevant assessment year 1956-57 came to be made on the 15th June, 1956. Before that time the minor, Om Prakash, had become major on the 15th September, 1955. He did not opt to come out of the partnership on becoming major, and, therefore, must be treated as having become a full-fledged partner of the firm in question. That being so, having regard to the requirements of rules 2 and 6 read with section 26A of the Act, as we have discussed above, it was imperative that the application for renewal of registration must have been signed not only by the other two partners, but also by Om Prakash. That was admittedly not done and, consequently, the conclusion seems to us to be irresistible that the Income-tax Officer and the Appellate Tribunal were perfectly justified in refusing to renew the registration for the year in question. We, therefore, answer the question referred to us in the affirmative. Under the circumstances we make no order, as to costs.