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1965 (4) TMI 18 - SC - Income TaxWhether the assessee, Mohandas Sadhuram, can be granted registration under section 26A of the Indian Income-tax Act, on the basis of the partnership deed made on April 1, 1952, for the assessment year 1953-54 and on the basis of the said deed read with the supplementary deed on April 1, 1953, for the assessment year 1954-55? Held that - The partnership deed, reasonably construed, only confers benefits of partnership on the two minors and does not make them full partners. The guardian has agreed to certain clauses in order to effectuate the decision of the major members to confer the benefits of the said partnership to the minors. Accordingly, we hold that the income-tax authorities should not have declined to register the firm. We may mention that the supplementary deed dated April 1, 1953, has not been included in the statement of the case, but it is common ground that nothing turns on any of the clauses in the supplementary deed. Accordingly, agreeing with the High Court, we hold that the firm is entitled to be registered under section 26A of the Income-tax Act, and the answer to the question referred is in the affirmative. Appeal dismissed.
Issues:
1. Registration under section 26A of the Indian Income-tax Act based on a partnership deed. 2. Interpretation of clauses in the partnership deed regarding minors' involvement. 3. Validity of the partnership deed for granting registration. Analysis: The case involved two appeals challenging the High Court's judgment regarding registration under section 26A of the Income-tax Act based on a partnership deed. The main issue was whether minors were made full partners or only admitted to the benefits of the partnership. The partnership deed explicitly stated that major members decided to constitute the partnership and admit minors to its benefits. The clauses in the deed regarding business activities, capital contribution, duration of partnership, and accounting methods were analyzed to determine the nature of minors' involvement. The court referred to the Partnership Act's provisions, emphasizing that a minor cannot be made liable for losses and can sever connection with the firm through evaluation of their share. The guardian's role in accepting benefits on behalf of a minor was crucial, allowing for scrutiny and acceptance of partnership terms. The court concluded that the partnership deed only conferred benefits on minors, not full partnership status, and upheld the firm's entitlement to registration under section 26A. The court also considered the supplementary deed filed for extending the partnership beyond the initial period. However, it was noted that the clauses in the supplementary deed did not impact the decision as the main partnership deed already established the nature of minors' involvement. The court dismissed the appeals, affirming the firm's right to registration under section 26A of the Income-tax Act. The judgment highlighted the importance of reasonable construction of partnership deeds, adherence to legal provisions regarding minors' rights, and the guardian's authority in securing benefits for minors in partnerships.
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