1985 (11) TMI 20 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was correct in holding that registration could not be refused on the ground that the application for registration was not signed by a partner and in directing the Income-tax Officer to give an opportunity to the assessee to correct the application by putting the relevant signature.
2. Whether the Tribunal was correct in law in holding that the partnership was valid despite the fact that the deed had not been signed by a partner who was a minor at the time of coming into existence of the firm but was a major at the time of execution of the deed.

Issue-wise Detailed Analysis:

Issue 1: Application for Registration Not Signed by a Partner
The Tribunal held that registration could not be refused solely because the application for registration was not signed by one of the partners, Prem Lal, and directed the Income-tax Officer to allow the assessee to correct the application by adding the relevant signature. The Tribunal's decision was based on the provisions of section 185(2) of the Income-tax Act, 1961, which mandates that the Income-tax Officer must intimate the defect to the firm and give it an opportunity to rectify the defect within a month. This view is supported by various judicial precedents, including the Supreme Court's decision in Pratapmal Luxmichand v. CIT, which established that defects in the application form can be rectified but not in the deed of partnership. Other supporting cases include Singh Brothers & Co. v. CIT, Ganga Motor Service v. CIT, Alankar Jewellers v. CIT, and Brij Ratan Lal Bhoop Kishore v. CIT, all reinforcing the principle that the Income-tax Officer must provide an opportunity to rectify defects in the application form.

Issue 2: Validity of Partnership Deed Not Signed by a Major Partner
The Tribunal's decision that the partnership was valid despite the deed not being signed by Prem Lal, who was a major at the time of execution, was contested. The Tribunal noted that Prem Lal was a minor when the partnership commenced and became a major on May 31, 1967. The partnership deed was executed on September 25, 1967, but did not reflect Prem Lal's majority status, which the Tribunal deemed a technical oversight without misrepresentation. The Tribunal argued that the Income-tax Officer should have allowed the assessee to rectify the application for registration. However, the High Court found that the partnership deed was defective because it did not accurately reflect Prem Lal's status as a major, which was known to all partners. The High Court emphasized that a fresh partnership deed specifying Prem Lal's share in profits and losses was necessary upon his attaining majority. The absence of such a deed rendered the partnership invalid for registration purposes. This view is supported by judicial decisions such as Niadar Mal Jagdish Parshad v. CIT, Ganesh Lal Laxmi Narain v. CIT, Ram Das Ashok Kumar v. CIT, P. N. Sarmah v. CIT, Mobarak Ali Khan and Sons v. ITO, Addl. CIT v. Gauri Vishwanath Dal Mills, and CIT v. Mathura Prasad Annoolal, which collectively underscore the necessity of a valid partnership deed and the implications of a minor attaining majority.

Conclusion:
Regarding Issue 1, the Tribunal was correct in holding that registration could not be refused on the ground that the application for registration was not signed by a partner and in directing the Income-tax Officer to give an opportunity to the assessee to correct the application by putting the relevant signature. However, this finding is academic in light of the conclusion on Issue 2. Regarding Issue 2, the Tribunal was not correct in law in holding that the partnership was valid despite the deed not being signed by the partner who was a minor at the time of the firm's inception but a major at the time of execution. The partnership deed was deemed defective, and registration could not be granted. Therefore, the High Court answered Question No. 1 in the affirmative and Question No. 2 in the negative, with no order as to costs.