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TMI Blog1975 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... was delivered by GUPTA J.- This appeal by special leave is directed against an order of the High Court of Andhra Pradesh at Hyderabad answering in the negative and in favour of the revenue the following question referred to it under section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as "the Act"): "Whether the assessee is entitled to registration under section 26A of the Indian Income-tax Act, 1922, for the assessment year 1961-62 ? " The assessee is a firm. The instrument of partnership was executed on January 5, 1959, but the application for registration under section 26A remained undisposed of until the assessment for the year 1961-62 was taken up. The instrument shows that three persons, Mandyala Naraya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, registration under section 26A "confers on the partners a benefit as would appear from the provisions of section 23(5) of the Act, "to which they would not have been entitled but for section 26A, and such a right being a creature of the statute, can be claimed only in accordance with the statute which confers it, and a person who seeks relief under section 26A must bring himself strictly within its terms before he can claim the benefit of it " Rao Bahadur Ravulu Subba Rao v. Commissioner of Income-tax. The question in this case is whether in the absence of a specific statement in the instrument as to the proportion in which the partners were to share the losses, the requirement of section 26A can be said to have been satisfied. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, therefore, that the application for registration which has to be made in the prescribed form must include particulars of the apportionment of the loss, if any. It does not appear to have been considered in this case whether the application for registration made by the firm conforms to the prescribed rules; the dispute is confined to the question whether section 26A requires the instrument of partnership to specify the individual shares of the partners in the profits as well as the losses of the business. Section 23(5) of the Act provides different procedures in the assessment of a registered firm and a firm that is unregistered. Without going into details, in the case of a registered firm the share of each partner in the firm's profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act "; that they are in any case, and it is not clear which provision of the Partnership Act indicated the proportion in which the partners were to bear the losses in this case. Counsel for the appellant refers to section 13(b) of the Partnership Act in this connection. Section 13(b) reads : "Subject to contract between the partners-... (b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm." We shall refer to section 13(b) in more detail when we consider the other contention of the appellant, but assuming that this provision has any relevance to the facts of this case, which it has not, bringing in by implication section 13(b) from a general state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icting views of the different High Courts and decide which view is correct according to us because on the facts of the case the appeal is bound to fail on any view. It is not, and it cannot be, disputed that the Income-tax Officer before allowing the application for registration must be in a position to ascertain the shares of the partners in the losses even if section 26A did not require the shares in the losses to be specified in the instrument of partnership. Counsel for the appellant argues that clause 9 of the instrument refers to section 13(b) of the Partnership Act by implication and, accordingly, in the absence of any contrary indication, it must be held that the partners are liable to share the losses equally. The argument is not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e section, it lays down two presumptions with which the court should start. The two presumptions are clubbed in one sub-section. The first is, if no specific contract is proved, the shares of the partners must be presumed to be equal. In the present case the plaintiff alleged unequal shares which were not denied by the defendants. So the parties being agreed on their pleadings as to the shares possessed by them in the profits, there is no scope for the application of this first presumption. The second presumption is that where the partners are to participate in the profits in certain shares they should also participate in the losses in similar shares. Now, the section says that both should be in equal shares but implies that if unequal shar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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