1961 (3) TMI 6 - SC - Income Tax

Whether the assessee firm is entitled to registration under section 26A of the Income-tax Act for the assessment year 1955-56 ? Held that - In the present case an instrument of partnership was in existence but it did not specify the shares which was one of the requirements for registration and that condition was fulfilled by the deed of rectification dated September 17, 1955. Therefore, it cannot be said that there was the requisite instrument of partnership specifying the individual shares of the partners during the year of account. The High Court, in our opinion, was right in answering the question in the negative. Appeal dismissed.

Summary

Issues:
1. Whether the assessee firm is entitled to registration under section 26A of the Income-tax Act for the assessment year 1955-56?

Detailed Analysis:
The case involved an appeal against the High Court of Judicature at Madras judgment regarding the registration of a partnership firm under section 26A of the Income-tax Act for the assessment year 1955-56. The appellant firm had made a deed of rectification on September 17, 1955, to specify the shares of the partners, which were not explicitly mentioned in the original partnership deed. The Income-tax Officer refused registration, leading to subsequent appeals up to the Supreme Court.

The main contention was whether the clauses in the partnership deed, such as clauses 9, 11, 34, and 41(a), sufficiently specified the shares of the partners as required by law. However, upon detailed examination, it was found that none of these clauses explicitly stated the individual shares of the partners in the profits and losses of the firm. The court emphasized that for registration under section 26A of the Act, it was essential for the instrument of partnership to specify the individual shares of the partners, a requirement not met by the original deed.

Referring to legal precedents, the court highlighted that registration under section 26A confers a specific benefit on the partners, which can only be claimed by strictly adhering to the terms of the statute. The court cited the importance of full compliance with the law's requirements for proper administration and enforcement of registration provisions. It was concluded that the deed of rectification executed after the close of the account year did not fulfill the essential requirement of specifying the partners' shares during the relevant period, leading to the refusal of registration.

In light of the above analysis, the Supreme Court upheld the High Court's decision and dismissed the appeal with costs, emphasizing the significance of complying with statutory requirements for partnership registration under section 26A of the Income-tax Act.