1988 (7) TMI 21 - HC - Income Tax

Summary

Issues: Validity of partnership deed with a minor partner and entitlement to registration for assessment year 1969-70.

In this judgment by the High Court of Calcutta, the primary issue revolved around the validity of a partnership deed that included a minor partner and whether the firm was entitled to registration for the assessment year 1969-70. The Income-tax Officer initially denied registration, citing that the clause in the partnership deed treating the minor partner equally with other partners rendered the partnership not genuine. However, the Appellate Assistant Commissioner overturned this decision and granted registration. The Department then appealed to the Tribunal, which held that the minor partner being admitted only to the benefits of the partnership did not invalidate the deed. The Tribunal also noted that no capital was actually contributed by the minor. The crucial question was whether the clause requiring the minor to contribute capital would invalidate the partnership deed.

The High Court analyzed the legal aspect of a guardian entering into a partnership on behalf of a minor and clarified that a minor cannot be a full-fledged partner. Even if a guardian agrees to contribute capital on behalf of a minor, it does not make the minor a full partner. The Court referred to a precedent where it was held that a deed is not invalid if the guardian agrees to contribute capital on behalf of a minor without making the minor a full partner. The clause in question, stipulating the minor's contribution of capital and liability for interest in default, did not render the partnership invalid. Therefore, the Court concluded that the partnership deed was valid, and the firm was entitled to registration for the assessment year 1969-70.

The judgment, delivered by Justice Ajit K. Sengupta, answered the referred question in the affirmative and in favor of the assessee, allowing the firm's registration. Justice K. M. Yusuf concurred with the decision. The Court made no order as to costs, concluding the matter in favor of the assessee based on the legal interpretation provided regarding the partnership deed's validity with a minor partner.