1969 (10) TMI 9 - HC - Income Tax

Firm - application for registration - minor partner had become major but he had not signed the application for registration of the assessee-firm - registration of the partnership was rightly refused as being void

Summary

Issues Involved:
1. Whether minors were made full-fledged partners, rendering the partnership deed void and not entitled to registration.
2. Whether the individual shares of the minors were specified in the partnership deed.
3. Whether the omission of a major partner's signature on the application for registration invalidated the application.

Issue-Wise Detailed Analysis:

1. Full-Fledged Partners:
The Tribunal held that minors, Mohinder Paul, Harish Chander, and Romesh Chander, were made full-fledged partners, making the partnership deed void. The partnership deed's clause 4 stated that partners 5 and 6 were admitted to the benefits of the partnership. However, clause 8 imposed liability for losses on all partners, including minors, making them liable beyond their capital contributions. This imposition of personal liability on minors contradicted section 30 of the Indian Partnership Act, 1930, which only allows minors to be admitted to the benefits of the partnership without personal liability. Hence, the registration was rightly refused as the partnership was void.

2. Specification of Individual Shares:
The Tribunal also questioned whether the individual shares of the minors were specified in the partnership deed. The Division Bench of this court in Commissioner of Income-tax v. Kishore Chand Ramji Dass had previously held that the collective share of minors, if clear from context, suffices for registration. The Gujarat High Court's contrary ruling in Commissioner of Income-tax v. Shivlal Dayaram Panchal was distinguished on facts. Thus, the answer to this issue was in the negative, supporting the assessee-firm's position that the collective share was adequately specified.

3. Omission of Major Partner's Signature:
The applications for registration for the assessment years 1953-54, 1954-55, and 1955-56 were not signed by Mohinder Paul and Harish Chander, who had attained majority. Rule 2 of the Indian Income-tax Rules, 1922, as amended by Notification No. S.R.O. 1953 of November 20, 1952, mandated that applications be signed by all partners (not being minors) before June 30 of the relevant year. The Appellate Assistant Commissioner's previous power to permit late signatures was removed by the amendment. The Income-tax Officer found no sufficient cause for the delay in obtaining signatures, a finding unchallenged by the assessee-firm. Consequently, the applications were rightly refused, as the omission rendered them defective.

Conclusion:
The High Court affirmed the Tribunal's decisions on all issues. The partnership deed was void due to the inclusion of minors as full-fledged partners. The individual shares of minors were deemed specified adequately. The applications for registration were invalid due to the omission of required signatures by major partners. The references were answered accordingly, with costs awarded to the Commissioner of Income-tax.