1968 (2) TMI 32 - HC - Income Tax

Firm - on the death of a partner, his widow and minor son were admitted as partners - partnership deed - Partnership Act provides that a minor cannot be admitted otherwise than for the benefits of the partnership - held that minor son and the widow were not partners jointly and therefore their individual shares need not be specified

Issues Involved:
1. Interpretation of the partnership deed dated February 25, 1953.
2. Entitlement of the assessee-firm to registration under the partnership deed.
3. Jurisdiction of the Commissioner of Income-tax under section 33B of the Indian Income-tax Act, 1922, after its repeal by section 297 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Interpretation of the Partnership Deed Dated February 25, 1953:
- Question (i)(a): The Tribunal was justified in law in holding that Smt. Tribeni Debi was a partner in a representative capacity.
- The partnership deed was between Baijnath Bajaj, Durga Dutt Bajaj, Keshardeo Bajaj, and Smt. Tribeni Debi, who signed for herself and as the natural guardian of her minor son, Gobindram Bajaj.
- Clause 4 of the deed specified that each partner would be entitled to a four annas share in the profits and liable for losses in the same proportion.
- The court found that Smt. Tribeni Debi joined the partnership as the fourth partner and her signing on behalf of her minor son did not affect her individual position in the partnership.
- The court concluded that Tribeni Debi was entering into the partnership individually and was not making her minor son a partner.

- Question (i)(b): The minor, Sri Gobindram Bajaj, was not made a full-fledged partner who had been made liable for losses also.
- The court referred to Section 30 of the Indian Partnership Act, which states that a minor may not be a partner in a firm but may be admitted to the benefits of partnership with the consent of all partners.
- The court found no clear recital in the deed that the minor was admitted as a partner.
- The court concluded that the minor was not made a full-fledged partner liable for losses.

- Question (i)(c): Smt. Tribeni Debi was not a partner in a dual capacity, and as such, the deed of partnership was not invalid.
- The court held that Tribeni Debi's obligations to her minor son did not change her individual character in the partnership.
- The court cited the Supreme Court's decision in Commissioner of Income-tax v. Bagyalakshmi & Co., which supported the view that a partner could act in a representative capacity without affecting the partnership's validity.

- Question (i)(d): Smt. Tribeni Debi and her minor son, Sri Gobindram Bajaj, had not been made partners jointly, and their individual shares were not required to be specified.
- The court held that the partnership deed clearly indicated only four partners.
- The court found no basis to hold that the minor was admitted into the partnership, thus no requirement to specify his share.

2. Entitlement of the Assessee-Firm to Registration:
- Question (ii): The Tribunal was justified in law in holding that the assessee-firm constituted under the deed of partnership dated February 25, 1953, was entitled to registration and in setting aside the order of the Commissioner under section 33B of the Indian Income-tax Act, 1922.
- The court held that the partnership deed was valid and genuine as it correctly described the partners and their shares.
- The court cited the Supreme Court's decision in Commissioner of Income-tax v. A. Abdul Rahim and Co., which held that once a partnership is found to be genuine and valid, registration cannot be refused on the ground that one of the partners is a benamidar.
- The court concluded that the assessee-firm was entitled to registration under section 26A of the Income-tax Act.

3. Jurisdiction of the Commissioner of Income-tax:
- Question (iii): The Commissioner of Income-tax could in law invoke jurisdiction under the provisions of section 33B of the Indian Income-tax Act, 1922, after the aforesaid Act had been repealed by section 297 of the Income-tax Act, 1961.
- The court referred to the Supreme Court's decision in Kalawati Devi Harlalka v. Commissioner of Income-tax, which held that the Commissioner had jurisdiction to issue notices under section 33B of the 1922 Act, in view of section 297(2) of the 1961 Act and paragraph 4 of the Income-tax (Removal of Difficulties) Order, 1962.
- The court concluded that the Commissioner had jurisdiction under section 33B of the 1922 Act even after its repeal by section 297(1) of the 1961 Act.

Conclusion:
All the questions were answered in the affirmative, affirming the Tribunal's decisions on all issues. No order as to costs was made.

← Previous Next →