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Issues Involved:
1. Proper construction of the partnership deed regarding the minor's status. 2. Entitlement to registration and continuance of registration for the assessment years 1969-70 and 1970-71. Issue-wise Detailed Analysis: 1. Proper Construction of the Partnership Deed Regarding the Minor's Status: The core issue was whether the minor, Shivashankar, was made a full-fledged partner liable to share in the losses of the assessee firm, or if he was merely admitted to the benefits of the partnership. The partnership deed dated October 12, 1967, did not explicitly state that the minor was admitted to the benefits of the partnership. Instead, the recitals indicated that Shivashankar was treated as a partner with the same rights and obligations as the other three partners. The deed was silent on the manner in which losses were to be borne, presumably implying that losses would be shared equally among all partners, including the minor. The CIT set aside the orders of registration and continuance of registration, holding that "the partnership deed read as a whole does not mention anywhere that the minor is admitted to the benefits of partnership, nor can it be inferred from any of the clauses." The Tribunal, however, relied on the Supreme Court decision in CIT v. Shah Mohandas Sadhuram [1965] 57 ITR 415, concluding that as long as the partnership deed did not make the minor a full partner, the deed could not be regarded as invalid. 2. Entitlement to Registration and Continuance of Registration for the Assessment Years 1969-70 and 1970-71: The Tribunal's decision was based on the interpretation that the guardian of Shivashankar had executed the deed on behalf of the minor only to secure the benefits of the partnership, in line with Section 30(1) of the Partnership Act. However, the High Court referenced the Supreme Court's decision in CIT v. Dwarkadas Khetan & Co. [1961] 41 ITR 528, which held that a minor could not be a full partner in a firm, and any document suggesting otherwise could not be valid for registration purposes. The Supreme Court had disapproved of the Madras High Court's view that a minor included as a partner did not invalidate the partnership and must be deemed to have been admitted to the benefits of the partnership. In contrast, the Supreme Court in CIT v. Shah Mohandas Sadhuram [1965] 57 ITR 415, and CIT v. Shah Jethaji Phulchand [1965] 57 ITR 588, found that if the partnership deed explicitly stated that minors were admitted to the benefits of the partnership and not to the liabilities, the firm could be registered. However, in the present case, there was no such recital in the partnership deed indicating that Shivashankar was admitted only to the benefits of the partnership. The High Court concluded that the Tribunal erred in construing the partnership deed as one admitting the minor only to the benefits of the partnership. The questions referred were answered in the negative and in favor of the department, indicating that the firm was not entitled to the registration and continuance of registration for the assessment years 1969-70 and 1970-71. Conclusion: The High Court held that the Tribunal was incorrect in its interpretation of the partnership deed and that the minor, Shivashankar, was treated as a full partner, making the firm ineligible for registration under the I.T. Act, 1961. The judgment emphasized the importance of explicit recitals in the partnership deed regarding the admission of minors to the benefits of the partnership to qualify for registration.
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