Dipak Kumar Sen, J.
1. The controversy in this reference is in respect of the registration of Messrs. Kumar Financing Corporation, Calcutta the assessee, which is a partnership firm. The facts found and/or admitted areas follows: The assessee was originally constituted by a deed executed on the. 7th December, 1957. On the 30th July, 1961, Anandilal Poddar, one of the partners, died and thereafter a new deed was executed on the 1st August, 1961, whereby the legal representative of the deceased partner was inducted into the firm. The other partners and their shares remained unaltered.
2. In respect of the assessment year 1962-63, by an application dated the 23rd May, 1963, filed under Section 184(7) of the I.T. Act, 1961, the partners of the firm as constituted by the earlier deed applied for continuation of the firm's registration for the period from the 1st April, 1961, to the 31st July, 1961, and by another application dated the 12th March, 1962, un.der Section 26A of the Indian I.T. Act, 1922 the partners of the new firm applied for registration for the period from the 1st August, 1961, to the 31st March, 1962. Inasmuch as the Indian I.T. Act, 1922, stood repealed on and from the 1st April, 1962, the partners of the new firm preferred a fresh application in Form No. 11-A under the I.T. Aet, 1961, for registration as directed by the ITO.
3. In the proceedings which followed the ITO found that the two minors admitted to the benefits of the partnership, namely, Pinku Kanoria andMunna Kanoria, respectively, the daughter and the son of Basudeo Kanoria, at no time withdrew anything from the firm on account of their shares in the profits and the entire amounts were allowed to accumulate. Though excluded from the benefits of the partnership from the 26th September, 1962, such accumulations aggregating to Rs. 88,360'47 remained credited with the firm. It was further found that the minors had each 15 paise share in the profits as against 5 paise share of the active adult partners. Munna Kanoria was assessed in the name of Harshvardhan Kanoria from the assessment year 1962-63 onwards only and in the assessments for 1962-63 and 1963-64 his share in the profits of the firm was not shown and it was not even declared that he was entitled to the benefits of the partnership. His wealth-tax returns were not filed. Neither income-tax nor wealth-tax returns were filed on behalf of Pinku Kanoria at all.
4. Accordingly, the ITO called upon the assessee to show cause why the firm should not be treated as not genuine and its registration should not be refused. The explanation furnished in reply was that though it had been agreed by and between Anandilal Poddar and the other partners that the said minors, the nephew and niece of the former, should be admitted to the benefits of the partnership, Anandilal Poddar did not intimate to the guardian of the minors about the same by oversight and, consequently, the guardian did not include the share of the income of the firm in the returns of the minors.
5. The ITO found that such oversight persisted for over nine years though the guardians of the other minors admitted to similar benefits in the said firm were duly informed of the same and the income of the said minors from their share of the profits of the firm were duly declared in their income-tax assessments. He noted that the disclosure petitions were submitted on the 7th October, 1966, under Section 271(4) by Basudeo Kanoria on behalf of the minors after the present enquiry was initiated. Examined by the ITO, Basudeo stated, inter alia, that in 1956, Anandilal had informed him that the said minors would be admitted to the benefits of the partnership in some of the firms in which Anandilal was interested. In 1958 Anandilal had confirmed that the minors had been duly admitted to the benefits of the partnership in the said firm. In the facts and circumstances, the ITO concluded that the provisions of the partnership deed had not been acted upon and he rejected the application for registration.
6. Being aggrieved, the assessee preferred an appeal. The AAC found, inter alia, that the minors never participated in the profits of the firm and their guardian was wholly in the dark for nearly ten years about the minor's admission to the benefits of the partnership. Accumulated credits aggregating to Rs. 1 lakh for each of the minors had not been made over to their guardian on the 26th September, 1962, when a new deed was drawn up excluding the said minors from the firm and even thereafter the same was transferred to the books of another firm, namely, Jainarayan Ramchandra. The AAC held that on such facts and circumstances the ITO was justified in refusing registration to the assessee.
7. There was a further appeal by the assessee to the Income-tax Appellate Tribunal. It was contended on behalf of the assessee in the appeal that on the facts found the conclusion of the authorities below was not justified. Non-contribution of the minors to the capital of the partnership was irrelevant particularly when there were other minors similarly admitted to the benefits of the partnership without any such contribution. The discrepancy in the quantum of shares of the partners was also irrelevant as the same was a matter of agreement. The continued retention of the minors' shares of profit in the firm was also not relevant in deciding the genuineness of the firm. Such facts might give rise to suspicion but were no proof that the firm was not genuine.
8. It was contended on behalf of the revenue on the other hand that, in the facts and circumstances, the conclusion that the said minors were in fact not admitted to the benefits of the partnership and that the assessee was not a genuine firm was justified.
9. The Tribunal found and noted the following facts :
' (1) That the Kanoria minors were admitted to the benefits of partnership with a much larger share of the profits than the two active partners without any material consideration whatsoever.
(ii) Their father and natural guardian did not know anything about it not only during the period when the minors remained admitted to the benefits of partnership but also for four years after such benefits were withdrawn.
(iii) There were no withdrawals by the minors and the share of profits credited to their account remained all through with the active partners who dealt with the same as they found suitable.
(iv) There was no suggestion that Mr. Kanoria had such habits that he was not informed about the real relationship in the interest of the minors.'
10. Such facts according to the Tribunal strongly suggested that the minors in fact were not admitted to the benefits of partnership and taking a practical view the Tribunal held it was always necessary for a guardian to know his minor ward's admission to the benefits of a partnership to protect the interests and enforce the rights of the minor. The Tribunal accordingly dismissed the appeal of the assessee.
11. On an application of the assessee under Section 256(2) of the I.T. Act, 1961, this court directed the Tribunal to draw up a statement of case and to refer the following question of law for the opinion of this court :
''Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the partnership, though legal, was not genuine ?''
12. It appears to us that the questions whether a partnership firm is genuine or not or whether the partnership firm at all came into existence or not are ex facie questions of fact. The conclusion of the Tribunal that the assessee was not a genuine partnership firm has not been challenged by the assessee as perverse or based on no evidence. None of the primary facts found by the Tribunal, on which such conclusion is based, has also been challenged.
13. Mr. R. N. Bajoria, learned counsel for the assessee, drew our attention to the following decisions of the Supreme Court :
Krishna Flour Mills v. CIT : 44ITR501(SC) , where the following proposition was laid down by the Supreme Court : ' Whether a firm is genuine or not is normally a question of fact. But, whether in the facts and circumstances found by the Tribunal there was material to come to the conclusion that the partnership firm constituted by a certain deed of partnership was not genuine is a question of law '
14. It was held in that case that the question whether, on the facts and circumstances found by the Tribunal, there was material to come to the conclusion that the firm was not genuine was a question of law and must be referred for the determination by the High Court.
15. The question before us is a different question.
16. Next cited was CIT v. Juggilal Kamlapat : 63ITR292(SC) for the following observations of the Supreme Court (p. 296) :
' The existence of a firm could be challenged on two alternative grounds. One was that, in fact, on the evidence, it could not be held that such a firm had at all been constituted and had come into existence. The other was that, even though it purported to come into existence as a fact, it could not claim to be a valid partnership because of some legal defect, or, in other words, whether its existence was valid in law. On the face of it, the question that was referred to the High Court for opinion was the second question and not the first one. The first question, in fact, could not have been referred to the High Court at all for opinion, because that would be a pure question of fact on which the decision of the Tribunal would be final and no reference to the High Court would lie under Section 66. A reference to the High Court lies only on a question of law. '
17. In the instant case, it is apparent that the controversy is one on facts There is no dispute that legally it was possible to admit the minors to thebenefits of the partnership. We are not inclined to accept the suggestion of Mr. Bajoria that we, should reframe the question referred on the lines of the question before the Supreme Court in Krishna Flow Mills' case : 44ITR501(SC) .
18. For the above reasons, the reference is disposed of by answering the question in the affirmative and in favour of the revenue. There will be no order as to costs.
C. K. Banerji, J.
19. I agree.