RAJAMANNAR, C.J. - The question referred for our decision in this case is as follows :-
'Whether on the facts and in the circumstances of this case, the application of the assessee for renewal of registration satisfied the requirements of Section 26A and the rules made thereunder and whether the firm is entitled in law to renewal of registration for purposes of the assessment for 1944-45 (accounting year ended 5th July, 1943).'
The three individuals who are the partners of the respondent firm executed a deed of partnership on the 30th August, 1939, in and by which it was declared that they shall carry on business in partnership for a period of three years from 28th May, 1939. It was inter alia provided in that deed that 'on the expiration of three years, if there is no unity between the partners, after paying off all the liabilities of the firm, and after taking back the capital contributed by the partners, the balance of profit or loss shall be divided equally; if any dues to the firm remain uncollected, and if proceedings have to be instituted, No. 1, Arokiaswamy Chetty shall attend to them.' The firm was registered with the Income-tax Officer and a certificate of registration was granted for the year 1940-41. For the year 1941-42 the certificate was again renewed by the Income-tax Officer and likewise for the following two years 1942-43 and 1943-44. We are concerned in this reference with an application for renewal of registration for the assessment year 1944-45. The Income-tax Officer refused to grant a renewal on the ground that the partnership deed in force during the accounting period was not in existence as the firm had been dissolved. He also held that there should be a firm constituted under an instrument of partnership and there being no partnership during the relevant year, the application was incompetent. The Appellate Assistant Commissioner on a construction of the deed held that after the expiry of the period of three years, if there were no differences between the partners, by virtue of the terms of the deed a partnership at will would come into existence which would of course continue until dissolved according to law. He therefore granted the application for registration. Before the Treble both the points were argued, namely, (1) on a construction of the deed of partnership, after the expiry of the three years fixed therein a partnership at will must be deemed to have come into existence and (2) that for the purpose of renewal it was not necessary that there should be an instrument of partnership operative at the time of the application or relating to the accounting period and it was sufficient if the partners and the shares remained unaltered. The Tribunal disagreed with the Appellate Assistant Commissioner on the first point. They held that once the period of three years was over, the deed ceased to be operative, i.e., after the expiry of the 29th May, 1942. But they held that under the provisions of Section 26A of the Act and the relevant rules framed under the Act, it was not necessary that there should be an instrument operative at the time of the application for the grant of a renewal of registration already granted when a deed of partnership was in force. In coming to this conclusion they relied upon Section 17 of the Partnership Act. The Commissioner of Income-tax thereupon made an application for a reference of the question of law in the terms already set out above and the Tribunal granted the application and have drawn up a statement of the case and referred the question to us.
We do not agree with the view of the Tribunal that for a renewal of registration there is no necessity for the existence of an instrument of partnership operative at the time of the application or relating to the accounting period. Section 26A does not refer in terms to renewal of registration. It follows that every renewal of registration is in effect a registration under that section. Sub-section (1) of that section clearly lays down that the application must be made on behalf of a firm constituted under an instrument of partnership. Nor is there anything in the rules made under Section 59 of the Act which leads to a different conclusion. The substantive rule dealing with renewal is rule 6. It runs thus :-
'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 or where the application is made after dissolution of the firm, by all persons (not being minors) who were partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased and accompanied by a certificate in the form set out below.'
It was contended that in this case the application was signed personally by all the partners of the firm and it complied with all the requisite conditions because it was stated that the partners and the shares remained unaltered. But, in our opinion, there is one fundamental defect in the application which precludes the respondent from taking advantage of rule 6. According to the finding of the Tribunal the firm constituted under the deed of partnership came to an end on the 29th May, 1942. On this finding it must follow that on the date of the application in this case, there was not in existence the firm to whom a certificate of registration was originally granted under rule 4. That firm must be deemed to have come to an end on the expiry of three years specified in the deed.
The Tribunal relied upon Section 17 of the Partnership Act. Clause (b) of Section 17 is the material provision and it is as follows :-
'Subject to contract between the partners,...... where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will.'
This provision must be read along with another provision in Section 42 the material portion of which is as follows :-
'Subject to contract between the partners, a firm is dissolved -
(a) if constituted for a fixed term, by the expiry of that term.' In this case it has been found by the Tribunal that the deed of partnership does not contain a contract to the contrary. The result is that on the expiry of the prescribed term, the firm as such became dissolved. If, thereafter, the partners of the dissolved firm continued to carry on business, no doubt their mutual rights and duties would be governed by Section 17 of the Act, but the partnership in law would be a different partnership, a partnership at will which must be deemed to come into existence immediately on the expiry of the prescribed period. We do not think that there is anything in the provisions of Section 17 to justify the conclusion that there is no necessity for an operative deed of partnership to entitle a firm to obtain renewal of registration. No other rule has been relied upon to support the conclusion of the Tribunal.
For the assessee it was sought to be contended that the Tribunal erred in its finding that the deed ceased to be operative after the expiry of 29th May, 1942. It was said that according to the terms of the deed it must be construed as a deed providing for a partnership for three years in the first instance and thereafter at will. Objection was taken on behalf of the department that it is not competent to this Court to go into that question as it was an independent question of law which had not been referred to this Court. The learned counsel for the assessee conceded that if it be held that the question as to whether the deed was operative after the expiry of 29th May, 1942, is deemed to be an independent question of law arising out of the order of the Tribunal and if that has not been referred to this Court, he would not be entitled to urge it. But he argued firstly that it was a subsidiary question of law and secondly that the terms of the reference for decision were so wide that it would include this question of law. We find it impossible to agree with him that this question of law is a subsidiary question of law. In fact learned counsel himself conceded that if the Tribunal had held in his favour on that question, he would have succeeded and it would have been unnecessary to go into any other question. It is equally true that the finding in his favour on the other question, namely, the necessity for an operative deed of partnership would also be sufficient to dispose of the questions. In so far as the answer to one of the questions was against the department, the department has made an application for reference, but the assessee has not chosen to apply for a reference as regards the question decided against him. The terms of the reference may no doubt appear to be wide. The routine clause 'on the facts and in the circumstances of this case' may be stretched to take in anything. But we consider that in construing this clause with reference to a particular case, due regard must be had to any findings of fact by the Tribunal and to findings of law which have not been sought to be questioned by either the assessee or the Commissioner by an application for reference. One of the facts in this case is that the Tribunal held that the deed of partnership was not operative after the 29th May, 1942, and there was no application for a reference on the question as to the correctness of that finding. We do not therefore think that there is anything in the frame of the question which compels this Court to deal with the question of law with reference to which there has been no application to refer to this Court. We therefore hold that the assessee is not entitled to be heard on the question whether the finding of the Tribunal that the deed of partnership ceased to be in force after the expiry of the period of three years is right or wrong.
The answer to the question will be in the negative. Because the assessee has failed he will pay the costs of this reference, Rs. 250.
Reference answered in the negative.