(The judgment of the Court was delivered by the Honble the Chief Justice).
The assessees are a firm of merchants carrying on business at Bezwada. The firm had been registered under the Indian Income-tax Rules, 1922, and as such were entitled to the benefits accruing to a registered firm under the Act. Rule 2 of the Statutory Rules requires a firm constituted under an instrument of partnership to register with the Income-tax Officer the particulars contained in the instrument. An application of this nature must be made by the partners or one of them. The application is required to be made in the form prescribed in the rules, and must be accompanied by the original instrument of partnership under with the firm is constituted, provided that for some sufficient reason the Income-tax Officer is satisfied that the original cannot be conveniently produced. When a certificate of Registration has been granted, it remains in effect up to the end of that financial year, but under Rule 6 is renewable by the Income-tax Officer from year to year on application made to him in that behalf and accompanied by a certificate signed by one of the partners of the firm that the constitution of the firm as specified in the instrument of partnership remained unaltered. In this case, the partnership was entered into for a period of five years from 23rd August 1932. The deed did not provide for a renewal and no fresh instrument was executed after the expiration of the period on the 22nd August, 1937. The Income-tax Officer refused to register the firm for the assessment year 1937-38 on two grounds : (i) The application was not made by any of the partners, but was signed by a clerk, and it was not accompanied by a certificate signed by one of the partners that the constitution of the firm remained unaltered; (2) There was no operative document to be registered after the 7th August 1937 as the instrument of partnership was operative only for five years from 8th August, 1932.
The assessees challenged the correctness of the decision of the Income-tax Officers, but it was accepted as being correct by the Assistant Commissioner and the Commissioner. On the representation of the assessees, the Commissioner has referred to the Court, under the provisions of Section 66 (2), the following question :-
'Whether on the facts of this case the Income-tax Officer was entitled to refuse registration of the firm ?'
The answer is that the was. The partnership deed not having been renewed by a written instrument, there was no instrument of partnership within the meaning of rule 2. Moreover, the fact that the application was not made by one of the partners but was signed by a clerk rendered the application invalid. It was also incomplete as it was not accompanied by a certificate signed by one of the partners.
As I have stated the answer to the question referred is in the affirmative, and the assessees must pay the costs of the reference, Rs. 250.
Reference answered in the affirmative.