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TMI Blog1981 (5) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... ns and is invalid for want of registration as a company as required under s. 11(2) of the Companies Act, 1956, and therefore, the assessee is not entitled to be considered as a firm or to the grant of registration under s. 185 of the IT Act. 3. The assessee was assessed as a registered firm upto and inclusive of the asst. yr. 1974-75. The firm originally consisted of six partners. During the previous year ended 31st March, 1975, relevant for the asst. yr. 1975-76, the firm was reconstituted under the partnership deed dt. 1st Oct., 1974 with fourteen partners and seven minors were admitted to the benefits of the partnership. One of these minors attained majority in the succeeding year and opted to continue as a partner. Accordingly another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that a minor had to be counted as a person for fixing the limit of twenty persons in the partnership. The argument advanced is that minor is a natural person, the expression used in s. 11(2) of the Companies Act is 'person', and therefore, a minor admitted to the benefits of partnership is a person for purposes of s. 11(2). It is pointed out that the expression 'partner' is defined in s. 2(23) of the IT Act as including any person who being a minor has been admitted to the benefits of partnership. According to the Deptl. Rep., by necessary implication, it means that the minor is a person, that the partnership consists of not only the adult partners but also the minors admitted to the benefits of partnership. It is also said that a minor de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsisted of less than twenty persons and there had been no violation of s. 11(2) of the Companies Act and the firm was entitled to be registered. 8. The material point thus arising for decision is whether a minor admitted to the benefits of partnership should be taken into account for determining whether or not the limit of twenty provided in s. 11(2) of the Companies Act has been exceeded. This section so far as it is relevant reads thus: "No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership, or by the individual members thereof, unless it is registered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstituted according to the provisions of the Partnership Act that can be considered as partnership for the purposes of s. 11 of the Companies Act. 10. The Indian Partnership Act. 1932, in s. 4 defines 'partnership' as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. 'Partners' are defined as persons who have entered into partnership with one another. The word 'person' occurring in s. 4 contemplates only legal persons. Minor is not a legal person and has no capacity to contract. Sec. 30 of the Partnership Act expressly provides that a person who is a minor may not be a partner of the firm though with the consent of the adult partners he may be admitted to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily funds, the other members of the family do not ipso facto become partners of the firm. It was also held that the definition 'person' under s. 2(9) of the Indian IT Act, 1922, which says that unless the context otherwise requires, 'person' includes a HUF cannot be imported into the Partnership Act and it is the Partnership Act of alone which is relevant under s. 2(6B) of the Indian IT Act, 1922 for finding out who can be joined as partners for the purpose of the latter Act. 12. Sec. 2(6B) of the IT Act, 1922, corresponds to s. 2(23) of the IT Act, 1961. According to the definition in s. 2(23) 'partner' includes any person who being a minor has been admitted to the benefits of partnership. This definition is intended for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried on business in contravention of s. 11, the partnership ipso facto become illegal. But such illegality supervenes only at a subsequent stage and that circumstances is not relevant for granting registration when the partnership is formed. 14. We are, therefore, of the view that for purposes of s. 11(2) of the Companies Act, it is only the adult partners who are the partners under the Partnership law that can be taken into account and that minors admitted to the benefits of partnership are not partners/persons to be considered for the purpose of fixing the limit of twenty. We hold that the partnership in this case consisted in each year of less than twenty persons, that the provisions of the Companies Act had not been contravened an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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