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TMI Blog1966 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... t for the assessment year 1961-62 ?" The assessee-firm was constituted under a deed of partnership dated November 14, 1955. It consists of three partners, namely, R. S. Satyanarayanappa, R. S. Chandrasekharappa and R. S. Venugopal. It is provided in the partnership deed that the profits earned by the firm shall be distributed in the following manner : (1) Reserve fund, one anna in a rupee. (2) Satyanarayanappa, six annas in a rupee. (3) Chandrasekharappa, six annas in a rupee. (4) Venugopal, three annas in a rupee. The deed is silent as to the manner of distribution of losses among the partners. The firm was granted registration under section 26A of the Act for the assessment year 1960-61. But, when it applied for renewal of its regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of partnership specifying the individual shares of the partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax. (Underlining is by us). (2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed. " Rules 2 to 6 of th e Rules framed under the Act relate to applications to be made under section 26A. It is not the case of the revenue that the assessee had not complied with those Rules. Admittedly the application made by him ful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. " Firm " is defined in section 2(6B) of the Act and that definition runs thus : " 'Firm', 'Partner' and 'partnership' have the same meaning respectively as in the Indian Partnership Act, 1932 (IX of 1932),.. . . " In Commissioner of Income-tax v. Bagyalakshmi & Co. the Supreme Court laid down that except where there is a specific provision of the Income-tax Act which derogates from any other statutory law or personal law, the provision will have to be considered in the light of the relevant branches of law. Therefore, for the purpose of finding out what exactly the legislature meant by saying " specifying the individual shares of the partners " in section 26A of the Act; we must go back to the Partnership Act. Section 4 of the Partners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip specifies the individual shares of the partners in the partnership profits, without more, it follows that the losses, if any, incurred by the partnership should also be shared in the same proportion in which the profits are to be shared by them. In the absence of a contract to the contrary, whenever an instrument of partnership specifies the proportion in which the partnership profits are to be distributed among the partners, it should be held as a legal inference that the losses also should be distributed among them in the same proportion. Such a clause can be considered as an implied term of the document or as an invisible term. If so read, the instrument of partnership with which we are concerned in this case must be held to have spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osses of the previous year. In fact, a contention similar to the one advanced by the learned counsel for the revenue did not commend itself to the Gujarat High Court in Thacker. &Co.'s case. But yet the learned judges therein proceeded to conclude that the instrument of partnership should specify the share of losses of individual partners on two grounds, namely, (1) that by implication the Supreme Court must be considered to have laid down such a position in R. C. Mitter & Sons v. Commissioner of Income-tax and (2) if such is not the position, the object of section 26A would be defeated. In R. C. Mitter & Sons v. Commissioner of Income-tax the Supreme Court was called upon to consider the scope of the expression "constituted under an instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mitter's case , we do not find even any casual observation bearing on the point under consideration. This takes us to the next question whether, if the individual shares of the partners in the losses of the firm are not mentioned in the instrument of partnership, the purpose of the Act is likely to be defeated or at least hindered. The purpose of the Act considered by the learned judges in Thacker & Co.'s case is the assessment of the assessee under section 23 of the Act. It is true, for that purpose it is necessary for the Income-tax Officer to know how the profits as well as the losses of the firm have been distributed among its partners. But if our earlier conclusion that, in the absence of a contract to the contrary, the losses should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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