1989 (8) TMI 120 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the partnership deed.
2. Representation of Lord Venkateswara as a partner.
3. Compliance with Section 184(3) of the Income-tax Act.
4. Applicability of case laws cited by both parties.
5. Liability implications for Lord Venkateswara.

Detailed Analysis:

1. Validity of the Partnership Deed:
The primary issue is whether the partnership deed dated 19-3-1980, which included Lord Venkateswara as a partner with a 1% share in profits and losses, is valid. The deed was signed by only four out of the five partners, with no signature representing Lord Venkateswara. The Income-tax Officer held that this contravened Section 184(3) of the Income-tax Act, which mandates that the application for registration must be signed by all partners. The Appellate Asst. Commissioner, however, found that the intention was to allocate 1% of profits to the Devasthanam and that the absence of the Deity's signature did not invalidate the deed.

2. Representation of Lord Venkateswara as a Partner:
The Revenue contended that Lord Venkateswara, as a juristic person, must be represented by a valid representative, specifically the Tirumala Tirupathi Devasthanam (TTD). Since TTD did not sign the partnership deed, the Revenue argued that the Deity was not validly represented, making the partnership invalid. The Appellate Asst. Commissioner disagreed, stating that the allocation of 1% profits to the Devasthanam was sufficient.

3. Compliance with Section 184(3) of the Income-tax Act:
The Revenue argued that the partnership deed and Form No. 11 were not signed by all partners, thus contravening Section 184(3). The Appellate Asst. Commissioner held that the omission of the Deity's signature did not warrant refusal of registration. However, the Tribunal found that the provisions of Section 184(3) are mandatory and were indeed contravened, as the application for registration was not signed by all partners.

4. Applicability of Case Laws:
The Revenue cited two cases, Manohar Das Kedar Nath v. CIT and CIT v. Tapang Light Foundry & Co., to support their position. The Appellate Asst. Commissioner relied on the Karnataka High Court decision in Bhagwanchand S. Jain & Co. The Tribunal distinguished the Karnataka case, noting that it involved 'charity' as a partner, not a Deity, and that the issue was continuation of registration, not initial grant. The Tribunal found the Calcutta High Court decision in Tapang Light Foundry & Co. more applicable, which held that a Deity, even if a juristic person, cannot be a partner.

5. Liability Implications for Lord Venkateswara:
The Revenue argued that if Lord Venkateswara were considered a partner, the Deity would be liable for the firm's debts and liabilities, which is untenable. The Tribunal agreed, stating that allowing such liability would expose the Deity's assets to claims against the firm, which is not permissible.

Conclusion:
The Tribunal concluded that the partnership deed was invalid due to the lack of representation of Lord Venkateswara. The provisions of Section 184(3) were contravened as the application for registration was not signed by all partners. The Karnataka High Court decision was distinguished, and the Calcutta High Court decision was found applicable. Consequently, the Tribunal allowed the Revenue's appeal and ordered the cancellation of the registration of the assessee-firm.