Sabyasachi Mukharji, J.
1 .In this reference under Section 256(1) of the I.T. Act, 1961, the following question has been referred to this court:
' Whether, on the facts and in the circumstances of this case, theTribunal was correct in law in holding that the share income accruing tothe minor, Sri Kanhaialal, in the firm of M/s. Ganpatrai Sagarmal wasrightly included in the total income of the assessee under Section 64(ii)of the Income-tax Act, 1961 ?'
2. By an indenture dated the 10th January, 1946, a partnership firm was created in which Sagarmal Lohariwalla had 10 annas share and Ramesh-warlal Lohariwalla had 6 annas share. On the 6th November, 1949, Sagarmal and Rameshwarlal executed a deed of trust covering the business which was carried on under the partnership deed mentioned hereinbefore.
3. In the preamble to the document it was mentioned that the entire property represented by the said business should vest in a body of persons consisting of Sri Prithi Raj Thard, Sm. Mahadei, wife of Sagarmal, and the two donors, namely, Sagarmal and Rameshwarlal, who were collectively referred to as the donees or trustees. According to the document, the business was to be carried on by the donees or trustees, 3/4ths of the profits accruing each year was to be allocated or distributed equally, that is to say, at 6 annas each to Sagarmal and Rameshwarlal, and the remaining 1/4th share was to be allocated and distributed to a 'charity account' in the ledger to be applied or accumulated and thus set apart for religious or charitable purposes in the manner mentioned in the said document. On the 23rd May, 1952, in the assessment order, the ITO referred to the earlier partnership and also to the document dated the 6th November, 1949. The , Income-tax Officer held that two of the beneficiaries, viz., Sagarmal and Rameshwarlal, would be assessed directly as per allocation given in the assessment order while the charity income should be assessed in the hands of the trustees. This was in respect of the assessment year 1950-51.
4. On the 29th November, 1954, Sagarmal made a will. In the said will, he provided, inter alia, as follows :
'By my adopted son, Rameshwar, I have one grandson, named Sri Kanhaialal Lohariwalla, who is now a minor. My son, Rameshwar, hasappointed his wife to be the natural guardian of the minor after my death till the minor attains majority.'
5. He also stipulated as follows :
' I make the following disposition of property and arrangements to take effect after my death :
(a) I have the right to receive six (-/6/-) annas share of the annual net profits of the business carried on under the name and style of M/s. Ganpatrai Sagarmall, at 12, Armenian Street, Calcutta, from the trustees as per indenture dated the sixth of November, 1949. Upon my death the said right to receive six annas share of the profit annually shall go to my wife, Sreemati Mahadei, and to my grandson, Sree Kanhaialal Lohariwalla, now a minor, in equal shares that is, each of them shall receive annually three annas out of the said net profits of six annas.
(b) The liability to make good half or annas eight of the trading loss of the said business accruing, if any, in any year, that rested on me as per terms of the said indenture dated sixth November, 1949, has not up till now arisen, there being no such loss accruing in any year. If, however, God so wills, that there accrues such a loss in any future year then my said liability shall devolve equally, that is, at four annas each thereof, on my wife, Sreemati Mahadei, and on my grandson, Sree Kanhaialal Lohariwalla, respectively.
(c) The credit balance of my personal account in the books of the said business M/s. Ganpatrai Sagarmall would be near about Rs. 2,50,000 (rupees two lakhs and fifty thousand) at present including the due interest and the share of profit and opening balance brought forward from the last Diwali accounting year. A sum of rupees sixty thousand (Rs. 60,000) only in cash shall be debited to my said personal account and paid on my death to Sri Rameshwarlal Lohariwalla, my adopted son and erstwhile partner. A further sum of Rs. 10,000 (rupees ten thousand) only shall also be debited to my said account on my death and paid in cash to my wife, Sreemati Mahadei, to meet expenses of my sradh and the feeding of the poor, and such other rituals and ceremonies incidental therewith at Gaya, Brindaban, Hardwar, Calcutta, and/or such other place or places as she may think proper and fit.
(d) The balance remaining over in my said personal account after disbursing Rs. 70,000 (rupees seventy thousand) only therefrom as provided above would amount to nearly Rs. 1,80,000 (rupees one lakh and eighty thousand) and this amount shall be divided half and half each and transferred to separate personal accounts of my wife, Sreemati Mahadei, and of my grandson, Sree Kanhaialal Lohariwalla. The half share, that is, four annas out of my share of half of the liability, to make good the trading loss if any, accruing in any year in the business that shall devolve on mygrandson, Sree Kanhaialal Lohariwalla, by paragraph (b) above set forth, shall be reimbursed out of the sum of Rs. 90,000 (rupees ninety thousand) approximately, more or less which shall be transferred to the personal account of my said grandson, Sree Kanhaialal Lohariwalla, according to the direction left by me in this present paragraph.'
6. The other clauses of the disposition need not be referred to for our present purpose. But it may be mentioned that by Clause (g) Sagarmall had stipulated as follows :
'(g) Under the terms of the indenture dated the sixth day of November, 1949, I have the duty, along with Sree Rameshwarlal Lohariwalla of carrying on the actual management of the business and the conduct of the affairs or the day to day transactions relating thereto under the trustees in order to ensure the smooth and the efficient working of the said business, and I desire and direct that after my death my wife, Sreemati Mahadei, and, my minor grandson, Kanhaialal Lohariwalla, on his attaining majority, shall each do the same and give and render to Sree Rameshwarlal Lohariwalla, as far as practicable, may be required, and contribute towards the fulfilment of the purpose of and carry out the objects and terms of the said indenture dated sixth November, 1949. This shall apply also to the heirs, successors or legal representatives of each of them on whom might devolve his or her right or liability, etc., under this will.'
7. On 15th April, 1955, Sagarmal died.
8. A fresh document of partnership was executed on the 3rd January, 1956. The recital portion of that document is important and reads as follows:
' This indenture made this thirtieth day of January, one thousand nine hundred and fifty-six between Sri Rameshwarlal Lohariwalla, son of late Sheobux Lohariwalla, at present residing at 12, Armenian Street, in the town of Calcutta, hereinafter called the party of the First Part and Sreemati Mahadei, widow of late Sagarmall Lohariwalla (son of late Ganpatrai Lohariwalla), at present residing at 8, Jadulal Mullick Road, in the town of Calcutta, hereinafter called the;party of the Second Part, and Sreemati Gayatri, wife of Rameshwarlal Lohariwalla, hereinafter called the party of the Third Part, representing as natural guardian of her minor son, Sri Kanhaialal Lohariwalla, and whereas the party hereto of the First Part and the late Sagarmall Lohariwalla (son of late Ganpatrai Lohariwalla) and husband of Sreemati Mahadei, the party of the Second Part, had been carrying on a business in co-partnership with each other dealing in spices, betel nuts, commission agency, etc., under the name and style of Messrs. Ganpatrai Sagarmal at No. 12, Armenian Street, Calcutta, sincethe beginning of the Dewali year 2001-02, under certain terms and condi-tions embodied in writing in an instrument of partnership between themselves executed on the basis as aforesaid, the partners, namely, Sri Rameswarlal Lohariwalla, the party hereto of the. First Part, and the said Sagarmall Lohariwalla.....'
The said document also provided, inter alia, as follows : '4. That the accounting year of the business shall continue to be the Dewali year as before or such other year as may be decided on by the Donees or the Trustees among themselves by mutual consent, and the books of account shall be adjusted according to such year or such other year as may be decided or agreed on followed by distribution or applications or appropriation or setting apart of the profits or loss, as the case may be, according to the terms arid conditions and shares and manner laid down hereinbefore in view of the will and testament of the late Sagarmall Lohariwalla and the indenture dated 6th November, 1949.
5. That six annas share of the profits accruing in any year shall be . allocated or distributed to the account of the party hereto of the First part, as before, and three annas share of the said profits shall similarly be allocated or distributed to the account of Sreemati Mahadei, and three annas of the same shall also be allocated or distributed to the account of the minor Sri Kanhaialal Lohariwalla, for whom his mother, Sreemati Gayatri, the party hereto of the Third Part 'is acting as natural guardian, and the balance four annas of the' profits shall continue to be allocated or distributed to the charity account in the ledger to be applied or accumulated and set apart, as the case may be, for religious and/or charitable purpose in manner already being done according to the indenture dated 6th of November, 1949.
6. That in the event of the trading in any accounting year resulting in losses after meeting the usual expenses for running the business the allocation to the charity account or fund should be nil and the loss shall be made good half by the party hereto of the First part and one-fourth by Sreemati Mahadei, and the remaining one-fourth .by reimbursement out of the amount transferred to the personal account of Sri Kanhaialal Lohariwalla from the account of Late SagarmaH Lohariwalla as per terms of his will and testament dated 29th November, 1954.
7. That the capital remaining in the account of the late SagarmaH Lohariwalla on his death shall after carrying out the intentions and purposes of the will and testament in regard to the disbursement directed herein be divided half and half between Sreemati Mahadei and Sri Kanhaialal Lohariwalla and allocated to their accounts in the books of the business accordingly. The parties hereto of the First and the Second Parts will have the right to augment the working capital of the business from time to time according to necessity, if any, with interest at six per cent, perannum or such other rate or rates as may be agreed on among the Donees or Trustees, and the parties hereto of the First and the Second Parts shall also get interest at such rates, as the Donees or Trustees may decide on the , capital standing in their accounts in the books of the business.'
9. Though, it is not material for the present, it may be noted that on the 25th January, 1962 (Ganpatrai Sagarmal (Trustees) for Charitable Fund v. CIT : 47ITR625(Cal) ) this court by a judgment had held that the document dated the 6th November, 1949, only showed that at some date in the past the two partners Sagarmall and Rameshwarlal had agreed that the entire property represented by the business should be transferred to themselves along with other trustees and that the deed did not record that any such transfer was ever effectuated. This court had found that even when there was any income or profit, the same was not to go entirely to the erstwhile partners but was to be appropriated by them to the extent of the one-fourth for charity. It was, therefore, held that the said income was not exempt under Section 4(3)(i) of the Act.
10. On the 12th March, 1968, an assessment of the assessee in the instant case was made including the share income of the minor son, Kanhaialal, from the business of the unregistered firm. The AAC deleted the share income of minor son from the total income of the assessee by his order dated the 26th February, 1970. The Tribunal by an order dated the 5th April, 1971, cancelled the reassessments for the assessment years 1951-52 to1957-58, which had been reopened under Section 147(a) of the I.T. Act, 1971. By an order dated the 5th April, 1971, the Tribunal confirmed there assessment made under Section 147(b) of the I.T. Act, 1961, for the assessment year1958-59 holding, inter alia, that the firm was in existence and had not been taxed. By an order dated the 11th December, 1972, in this case, the Tribunal allowed the appeal by the revenue by holding that the share income of the minor son would be included in the income of the assessee. The present question has been directed out of the said finding of the Tribunal.
11. The question whether the share income of the minor should be included in the income of the assessee must be, in the facts and circumstances of this case, judged in the light of Section 64(ii) of the I.T. Act, 1961, and in the light of the partnership deed in the instant case. The main question is whether Kanhaialal Lohariwalla had been admitted to the benefits of the partnership because there is no dispute that he is the son of the assessee nor is there any dispute that the assessee is a partner of the said firm.
12. The main question is whether by the deed in question, the termswhereof we have set out hereinbefore, Kanhaialal was admitted to thebenefits of the partnership. 'Benefits of partnership' means the right toparticipate in the property of the firm after its obligations have been discharged. It was so pointed out by the Privy Council in the case of Sanyasi Charan Mandal v. Krishnadhan Banerji, AIR 1922 PC 237, where at page 240 of the report, the Privy Council observed that where a minor is admitted to the benefits of a partnership, he has merely the right to participate in the property of the firm after its obligations have been discharged. On behalf of the assessee, it was pointed out to us that Section 64 must strictly be construed as it provides for deeming income. Reliance in this connection was placed on the observations of the Bombay High Court in the case of Bhogilal Laherchand v. CIT : 25ITR523(Bom) , where the Bombay High Court dealing with the provision similar to Section 6, 4(ii) of the 1961 Act in connection with the Indian Income-tax Act, 1922, namely, Section 16(3) of the said Act, observed that the said provision must be strictly construed and if only a particular income came within the strict ambit of the section, the assessee could be made liable to pay tax on that income. Similar view was reiterated by the Supreme Court in the case of Philip John Plasket Thomas v. CIT : 49ITR97(SC) . It is true that as the section taxes the receipt by ohe as the income of another, the section should be strictly construed. But in construing the said section if interpretation of a deed becomes necessary, then, in our opinion, such a deed should be reasonably read. In reading the present partnership deed in order to find out whether the minor in question was admitted to the benefits of partnership, in our opinion, it is necessary to remember that a deed should normally be construed reasonably and fairly and in its entirety. It is also necessary to bear in mind that in construing a deed of this nature the construction to be preferred, if two views are possible on the construction of the deed, is the one which will make the deed valid and consistent with law. This is how more or less deeds of this nature have been approached by the courts. Before we refer to the said decisions it is necessary to refer to the decision of the Supreme Court in the case of CIT v. Dwarkadas Khetan & Co. : 41ITR528(SC) , where the Supreme Court observed that a partnership deed in which a minor was admitted as a full partner was not valid. Section 30 of the Indian Partnership Act clearly laid down that a minor could not become a partner, though with the consent of the adult partners he might be admitted to the benefits of partnership. Any document which went beyond the provisions of Section 30 of the Partnership Act was invalid. Therefore, if a document, read properly, stipulated that a minor was made a full partner and not admitted merely to the benefits of the partnership, such a document would be invalid in law. It is, therefore, necessary in construing the document in question before us to bear this principle in mind to find out whether in fact by the document Kanhaialal was admitted merely to thebenefits of the partnership or had been made a full-fledged partner. Counsel for the assessee is right in contending that if it be held that Kanhaialal had been made a partner and not admitted merely to the benefits of the partnership, in view of the terms of Section 64(ii) of the I.T. Act, 1961, the income of Kanhaialal could not be included in the income of the assessee. We have mentioned before the principles according to which deeds of this nature should be construed. In the case of CIT v. Shah Mohandas Sadhuram : 57ITR415(SC) , the Supreme Court observed that the partnership deed must be construed reasonably and at page 420 of the report the Supreme Court observed as follows :
'Does this deed then make the minors full partners or does it only confer benefits of partnership on them Is any clause of the deed void Before we discuss these questions it is necessary to consider what are the incidents and true nature of 'benefits of partnership' and what is a guardian of a minor competent to do on behalf of a minor to secure the full benefits of partnership to a minor. First, it is clear from Sub-section (2) of Section 30 of the Partnership Act that a minor cannot be made liable for losses. Secondly, Section 30, Sub-section (4), enables a minor to sever his connection with the firm and if he does so, the amount of his share has to be determined by evaluation made, as far as possible, in accordance with the rules contained in Section 48, which section visualises capital having been contributed by partners. There is no difficulty in holding that this severance may be effected on behalf of a minor by his guardian. Therefore, Sub-section (4) contemplates that capital may have been contributed on behalf of a minor arid that a guardian may on behalf of a minor sever his connection with the firm. If the guardian is entitled to sever the minor's connection with the firm, he must also be held to be entitled to refuse to accept the benefits of partnership or agree to accept the benefits of partnership for a further period on terms which are in accordance with law. Subsection (5) proceeds on the basis that the minor may or may not know that he has been admitted to the benefits of partnership. This Sub-section enables him to elect, on attaining majority, either to remain a partner or not to become a partner in the firm. Thus, it contemplates that a guardian may have accepted the benefits of a partnership on behalf of a minor without his knowledge. If a guardian can accept benefits of partnership on behalf of a minor he must have the power to scrutinise the terms on which such benefits are received by the minor. He must also have the power to accept the conditions on which the benefits of partnership are being conferred. It appears to us that the guardian can do all that is necessary to effectuate the conferment and receipt of the benefits of partnership.
It follows from the above discussion that as long as a partnership deed does not make a minor full partner, a partnership deed cannot be regarded as invalid on the ground that a guardian has purported to contract on behalf of a minor if the contract is for the purposes mentioned above.'
13. We need not, however, consider the other clauses in the deed, which the Supreme Court had to construe, which were different from the deed before us. This court in the case of Jeewanram Gangaram v. CIT : 64ITR483(Cal) , noted at page 497, that a partnership deed must be interpreted reasonably on its own terms and as a whole and observed that if the deed, read as a whole, does not make the partner responsible for the liabilities of the firm and if he is merely admitted to the benefits of the partnership, it is not necessary expressly to state that the minor's share of loss shall be borne by one or more of the other major partners or by his guardians. If by the act of the firm the business suffers loss, the minor's share becomes liable for the loss but the minor himself does not become personally liable therefor. In the case of Chimanlal Umaji And Sons v. CIT : 98ITR306(MP) , the Madhya Pradesh High Court again reiterated that an instrument of partnership should be construed reasonably. Similar view was expressed by the Andhra Pradesh High Court in the case of CIT v. Kesarimal Hirachand : 81ITR693(AP) .
14. Strong reliance, however, was placed on behalf of the assessee on the decision of the Bombay High Court in the case of Cutsetji J. Dubash v. CIT : 49ITR671(Bom) . There the court noted the infirmity in the order of the ITO where the ITO as well as the AAC found that the minor had been made a partner. Upon that finding it was not possible to include the income of the minor in the income of the assessee because there was no positive finding by the ITO as well as the AAC that the minor had been admitted to the benefits of partnership and not made a full-fledged partner. The position in the instant case before us, however, is different. The Bombay High Court placed strong reliance upon the fact that the guardian of the minor, who was also another partner, had signed on behalf of the minor. In the instant case before us, the guardian has signed the agreement of partnership, the guardiaa being the mother of the minor who had been appointed as the guardian by the father by the will of Sagarmall, as we have mentioned hereinbefore. Counsel for the assessee made a strong point on this. We, however, fail to appreciate the significance of this point. In the case of an agreement on behalf of the minor, the agreement must be signed by the guardian, natural or otherwise, because a minor cannot make a contract for himself. Therefore, the fact that the agreement was signed by the guardian of the minor, does not, in our opinion, point to the fact that the minor was admitted to the partnership and not merely to the benefits of the partnership. Of course, aswe have mentioned hereinbefore, in the case before the Bombay High Court, the guardian, who had signed on behalf of the minor, was also a partner of the firm. That is a fact which is absent in the present reference before us. , Clause 6 of the deed noted before, in our opinion, is a definite indication of the fact that the minor would not be liable for the losses. It had provided for the loss of the business in clear and unequivocal terms. Such a clause was absent in the case before the Bombay High Court. In that view of the matter, we are unable to apply the ratio of the decision of the Bombay High Court in the facts and circumstances of the instant case. As we have mentioned before, Clause 6 of the present deed, in our opinion, read in the background of the will of Sagarmall, clearly indicates that the minor was being only admitted to the 'benefits of partnership '. We have also set out the other clauses, which indicate that in the management of the business of the firm, third party, namely, the minor, was not being given any part. These clauses, read in conjunction with and in the background of the will of Sagarmall, in our opinion, clearly establish that the minor was admitted to the benefits of partnership and was not made a full partner. If that is the position, then the inclusion of his income in the income of the assessee was clearly attracted by virtue of Section 64(ii). The Tribunal, therefore, in our opinion, came to the correct conclusion.
15. The question is, therefore, answered in the affirmative and in favourof the revenue. Parties will pay and bear their own costs.
Sudhindra Mohan Guha, J.
16. I agree.