1959 (4) TMI 3 - SC - Income Tax

Whether on the true interpretation of the deed of partnership dated February 6, 1948, the partners were (i) Smaller Patel & Co. ; (ii) Sheth & Co. ; (iii) Maharshi Dayanand Maha Vidyalaya ; or (i) Arjun Kunverjee Patel ; (ii) Jamnadas Bhanji Patel ; (iii) Nanji Kalidas Mehta ? Whether the firm Patel & Co. was entitled in law to be registered for the year 1949-50 under the Saurashtra Income-tax Ordinance and the rules made thereunder ? Whether the registration granted by the Appellate Tribunal for the year 1950-51 should be for the entire year of account, namely, 1949 or for the period from July 1, 1949 to December 31, 1949 ? Held that - Shri Rajagopala Sastri realised the force of this convention and fairly enough conceded that the appeal for assessment year 1949-50 could not be maintained. The appeal in so far as it concerned the assessment year 1949-50 will, therefore, be dismissed. We are of the opinion that this is a fair attitude to take up as the deed of partnership of the firm came into existence only on the 12th July, 1949, and under the terms thereof the partnership commenced with effect from July 1, 1949. That being the position the appeal so far as the assessment year 1950-51 is concerned will be allowed and the direction given by the High Court will be modified in that the registration of the firm will be operative for the period between July 1, 1949, and December 31, 1949. The appeal will, therefore, be allowed partially to the extent mentioned above and the order of the High Court will be varied accordingly. Appeal allowed in part.

Summary

Issues:
1. Registration of two partnership firms under the Saurashtra Income-tax Ordinance, 1949.
2. Interpretation of deeds of partnership.
3. Validity of registration for the assessment years 1949-50 and 1950-51.
4. Duration of registration for the assessment year 1950-51.

Analysis:

The judgment concerns the registration of two partnership firms under the Saurashtra Income-tax Ordinance, 1949. The first firm, Patel & Co., was constituted by a deed of partnership dated February 6, 1948, with three partners. The second firm, also named Patel & Co., came into existence under a deed of partnership dated July 12, 1949, with two partners. Both firms applied for registration, and the Income-tax Officer granted registration for both firms on the grounds of genuine partnership. However, the Commissioner of Income-tax later canceled both registrations, stating that the deeds of partnership were not signed by all partners.

The matter was appealed to the Tribunal, which affirmed the cancellation of registration for the assessment year 1949-50 but reversed it for the assessment year 1950-51, granting registration for the period from July 1, 1949, to December 31, 1949. The High Court answered questions of law raised by the Tribunal, confirming the partnership composition and affirming the registration for the year 1950-51 for the entire accounting year of 1949.

Regarding the assessment year 1949-50, a preliminary objection was raised on the maintainability of the appeal due to the absence of a provision for a certificate for leave to appeal under the Saurashtra Income-tax Ordinance, 1949. The appeal for 1949-50 was dismissed. For the assessment year 1950-51, the appellant contested the duration of registration directed by the High Court. The appellant sought registration only for the period from July 1, 1949, to December 31, 1949. The respondent agreed to this modification, and the Supreme Court allowed the appeal partially, modifying the registration duration accordingly.

As both parties partially succeeded in the appeal, each party was ordered to bear its own costs. The judgment allowed the appeal in part, modifying the registration duration for the assessment year 1950-51.