1982 (11) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Hindu deity is a juristic person capable of entering into a partnership and thus entitled to registration.
2. Whether the shebaits have become the partners in the firm on behalf of the deities.

Issue-wise Detailed Analysis:

Issue 1: Juristic Person and Partnership
The primary question was whether a Hindu deity, being a juristic person, could enter into a partnership and thus be entitled to registration under the I.T. Act, 1961. The Tribunal had held that the Hindu deity is a juristic person capable of entering into a partnership. The court examined the provisions of the I.T. Act and the Indian Partnership Act, noting that a partnership is defined as a relationship between persons who agree to share profits. The court referred to various precedents, including CIT v. Pulin Chandra Daw, which established that a Hindu deity is a juristic person capable of holding property and being assessed for income-tax purposes.

However, the court noted that the partnership deed in question allowed for the alienation of partnership assets not only for legal necessity but also for ordinary losses, which is contrary to the principles of Hindu law. This inclusion made the partnership deed illegal and thus not entitled to registration. Therefore, despite the Hindu deity being a juristic person, the specific clauses of the partnership deed rendered the partnership invalid for registration.

Issue 2: Shebaits as Partners
The second issue was whether the shebaits, who manage the deity's properties, could be considered partners on behalf of the deities. The Tribunal had upheld that the shebaits acted as partners for the deities. The court examined the role of shebaits, emphasizing that they are custodians and managers of the deity's properties, with limited rights to alienate these properties only in cases of legal necessity.

The court referred to various legal texts and precedents, including Mulla's Hindu Law and the case of Hoosen Kasam Dada v. CIT, which highlighted that properties given for religious purposes are generally inalienable except for legal necessity. The court concluded that the partnership deed's provisions allowing for alienation beyond legal necessity made it invalid. Thus, the shebaits could not be considered valid partners on behalf of the deities under the given partnership deed.

Conclusion:
The court answered both questions in the negative, ruling in favor of the Revenue. The partnership deed was not entitled to registration due to its clauses allowing for alienation of assets beyond legal necessity, which is contrary to Hindu law principles. Consequently, the shebaits could not be considered partners on behalf of the deities under this invalid partnership deed. Each party was ordered to bear its own costs.