1977 (3) TMI 61 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the partnership deed dated 5th April, 1972.
2. Impact of the rectification deed dated 15th July, 1974.
3. Requirement of all partners signing the partnership deed for registration.

Issue-wise Detailed Analysis:

1. Validity of the partnership deed dated 5th April, 1972:
The primary issue was whether the partnership deed dated 5th April, 1972 was valid. The Income-tax Officer (ITO) observed that two partners, P. Srinivasa Prabhu and P. Subhas Chandra Sekhar, were shown as minors in the deed, although they were majors. This led the ITO to conclude that the deed was invalid as not all major partners signed it, rendering the contract ab initio void. The Appellate Assistant Commissioner concurred with this view.

2. Impact of the rectification deed dated 15th July, 1974:
The assessee argued that the deed of rectification executed on 15th July, 1974 corrected the erroneous description of the partners' ages, making the original deed valid from its inception. The ITO rejected this, stating that the rectification deed was not in force during the relevant accounting year and thus could not retrospectively validate the original deed. However, the Tribunal found that the rectification deed merely corrected an obvious error without altering any other terms of the partnership. The Tribunal held that the rectification deed confirmed the correct status of the partners as majors and should be read together with the original deed as one document, thereby validating the partnership from 1st April, 1972.

3. Requirement of all partners signing the partnership deed for registration:
The ITO also held that the application for registration was invalid as it was not signed by all major partners. The Tribunal disagreed, citing legal precedents that a partnership deed does not become invalid merely because not all partners have signed it, provided there is evidence of their consent to be partners. The Tribunal noted that all partners, including the minors through their guardian, had signed the application for registration, indicating their consent.

The Tribunal referred to several rulings to support its stance:
- Imperial Automobiles vs. CIT, Madras: Highlighted that a rectification deed should be considered to determine if an error was cured.
- Jagan Nath Pyare Lal vs. CIT Patiala: Established that a partnership is not invalid merely because not all partners signed the deed if there is evidence of their consent.
- CIT, Bombay vs. Dwarkadas Ketan & Co.: Supported the view that a partnership can be valid even if not all partners signed the deed, provided they assented to it.

The Tribunal concluded that the partnership deed dated 5th April, 1972, as rectified by the deed dated 15th July, 1974, was valid. The assessee firm was entitled to registration as there was no infirmity in the partnership deed when read together with the rectification deed. The appeal was thus allowed.