1971 (1) TMI 5 - SC - Income Tax

Registration of a firm under the Partnership Act takes place only when the necessary entry was made in the register of firm under s. 59 of Partnership Act - If the firm was registered under the Partnership Act after the application under the Income-tax Act was made, the application for registration under s. 26A of Income-tax Act will be treated filed out of time - Revenue s appeal allowed

Summary

Issues:
- Interpretation of section 26A of the Indian Income-tax Act, 1922 regarding the time limit for filing an application for registration of a firm.
- Determination of the effective date of registration of a firm under the Partnership Act.
- Consideration of the High Court's judgment in favor of the assessee regarding the timing of firm registration.

Analysis:
The Supreme Court addressed the issue of whether an application under section 26A of the Indian Income-tax Act, 1922 for firm registration was filed within the prescribed time. The facts revealed that the application was received by the Income-tax Officer on October 14, 1955, and the firm's statement was filed with the Registrar of Firms on October 20, 1955. The Income-tax Officer rejected the registration due to the late application. The High Court favored the assessee, arguing that registration occurred on the date of application to the Registrar, but the Supreme Court disagreed.

The critical question revolved around the effective date of firm registration under the Partnership Act. The Court highlighted that registration only takes place when the Registrar records an entry in the register of firms, as per section 59 of the Partnership Act. Previous case law established that registration occurs upon entry in the register, not upon application submission. The Court rejected the High Court's reliance on a statement from the Government's Special Committee, emphasizing the Registrar's role as a recording officer with no discretion in registration matters.

Ultimately, the Supreme Court allowed the appeal, setting aside the High Court's judgment. The Court ruled in favor of the Income-tax Officer, stating that the application was not timely filed under rule 2(a) of the Act. The decision clarified that firm registration is effective only upon entry in the register of firms, not upon application submission. The appellant was awarded costs for the appeal.

In conclusion, the judgment provided a definitive interpretation of the timing requirements for firm registration under the Indian Income-tax Act and the Partnership Act. It emphasized the significance of entry in the register of firms as the decisive factor for registration effectiveness, rejecting the notion that registration occurs upon application submission.