V. Ramaswami, J.
1. The assessee is a firm of partnership consisting of five partners, of whom one was a minor admitted to the benefits of the partnership. The capital of the partnership was Rs. 5 lakhs. The contribution of each partner of the capital was as follows :
Rs.1.M.R. Rajakrishna1,25,0002.MinorSunitha Pratap1,87,5003.W.S. Parthasarathy62,5004.W.S. Sethunarayana Babu62,5005.M.S. Rajeswari62,500
2. It is seen from the above capital contribution that the shares of capital contribution work out as 25%, 37.5%, 12.5%, 12.5% and 12.5%. An application for registration was made on March 31, 1968, in respect of the assessment year 1967-68. The partnership deed itself was executed on 1st July, 1967. The partnership deed was signed by the guardian on behalf of the minor along with other partners. The application for registration was signed by the major partners. The partnership deed provided that the net profits ascertained shall be divided between the partners in proportion to their shares in the capital. The deed did not specify the shares of the partners in the losses. The ITO rejected the application among other grounds stating that there is no specification about the sharing of the losses in the instrument of partnership itself and that, therefore, the assessee is not entitled to get the firm registered. Bat on appeal against this order, the AAC was of the view that though there is no specification of the shares of the losses in the document itself, it should be taken that the parties intended to share the losses in proportion to the share in which they have contributed the capital leaving the minor not liable for the losses, since the minor was admitted to the benefits of the partnership. This view was confirmed by the Tribunal on an appeal preferred by the revenue. At the instance of the revenue, the following question has been referred to this court under Section 256(1) of the I.T. Act, 1961 :
'Whether, on the facts and in the circumstances of the case, and on a true construction of the terms of the partnership deed, the assessee is entitled to the benefit of registration under Section 185 of the Income-tax Act, 1961, for the assessment year 1968-69?'
3. It is seen that the document provided for sharing of the profits but did not mention anything at all about the sharing of the losses. Since the minor was admitted to the benefits of the partnership, the minor could not be held to be liable for any loss. The entire loss, therefore, would have to be apportioned by the major partners. Section 184 provides that an application for registration of a firm may be made to the ITO if the partnership is evidenced by an instrument and the individual shares of the partners are specified in that instrument. The question whether in the instrument itself there should be a specification of the share of losses also even when there is a specification of the sharing of profits, came up for consideration in a number of decisions. The Kerala High Court in both the decisions, CIT v. Ithappiri & George : 88ITR332(Ker) and United Hardwares v. CIT : 96ITR348(Ker) , to which one of us was a party, took the view that, on the clear language provided in the Act, the sharing of the losses also would have to be specifically provided and there is no scope for discerning any principle from the supposed intention of the parties. In the words of the learned judges in CIT v. Ithappiri & George : 88ITR332(Ker) :
'The question is not whether there is any rule of law discernible either from Section 13(b) of the Indian Partnership Act, 1932, or from any general principle from which it is possible to discern the proportion in which the losses should be shared but as to whether Section 184 insists that this should be stated in the instrument. As we said the expression used in the section must normally cover both aspects of profits and losses. There is no compelling reason to read down the expression and give it a limited meaning. Question of hardship cannot justify the adoption of such a course. The words have to be understood as including both profits and losses.'
4. In much more clearer terms in the later case in United Hardwares v. CIT : 96ITR348(Ker) , the learned Chief Justice held:
'Whatever that be, the question before us is not whether we can discern some principle or other for determining in what manner the losses should be borne by these two partners who are to take 40% and 35% of the profits but whether the partnership deed has specified that proportion.'
5. It is seen that the facts in United Hardwares v. CIT : 96ITR348(Ker) are almost identical. There, there were partners, of whom one was a minor admitted to the benefits of the partnership. The major partners were given 40% and 35% and the minor partner 25% in the profits. But there was no specification made in the document itself relating to the sharing of losses. It was argued that the sharing of losses should be deemed to be in the ratio of 40% and 35% which is the ratio in which they have to share the profits. It is with reference to these facts it was held that the question was not as to whether they could discern some principle or other for determining in what manner the losses should be borne by the two partners who were to take 40% and 35% of the profits but whether the partnership deed has specified that proportion. A similar view has been taken by the Gujarat High Court also in Thacker 6- Co. v. CIT : 61ITR540(Guj) . The question came up for consideration before the Supreme Court also in the decision in Mandyala Govindu & Co. v. CIT : 102ITR1(SC) . While they referred to the conflict of views on the question whether the sharing of the losses should be specified in the document itself, the learned judges proceeded to consider on almost identical facts, as to whether on any rule of law either under Section 13(b) of the Partnership Act'orfrom any general principle, it is possible to discern the proportion in whichlosses should be shared and held that (p. 7):
'.....where the shares in the profits are unequal, the losses must be shared in the same proportion as the profits if there is no agreement as tohow the losses arc to be apportioned, does not also apply to this case. Inthis case, even if the adult partners bear the losses in proportion to theirrespective shares in the profits, the amount of loss in the minor's sharewould still remain undistributed. Will the partners between them bearthis loss equally, or to the extent of their own individual shares To thisthe instrument of partnership does not even suggest an answer. There is,therefore, no means of ascertaining in this case how the losses are to beapportioned.'
6. This passage from the Supreme Court decision extracted above squarely applies to the facts of the present case. Though the minor is given a share of profits as 37.5%, as to how the losses relating to this 37.5% to be shared among the other four partners could not be determined on any principle of inference from the document itself. We are, therefore, of the view that the Tribunal clearly erred in holding that the firm is entitled to its registration on the ground that it shall be presumed that the losses are to be shared in proportion to the capital contribution by the major partners. Accordingly, we answer the reference against the assessee and in favour of the revenue. The revenue will be entitled to its costs. Counsel's fee, Rs. 250.