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TMI Blog1962 (3) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... deed of 1949: Clause 2:--The partnership business shall be carried on as long as the senior partners or a majority of them so desire provided that if any partner shall be desirous of retiring from the partnership at any time during the continuance of the partnership he shall be at liberty to do so only on the 30th day of June or the 31st day of December in any calendar year, and only on giving at least two months' previous notice in writing ending with the 30th day of June or the 31st day of December, as the case may be, to the managing partners.......and immediately after the 30th day of June or the 31st day of December, as the case may be, the partner giving such notice shall cease to be a partner and subject thereto the business of the partnership shall be continued by the remaining partners. Clause 3:--At the end of every year, that is to say, on the 31st day of December (or at the end of every period of six months, namely, on the 30th day of June and the 31st day of December if the partners or a majority of them so decide) a general account and balance-sheet shall be made by the partners who shall be at the head-office of the firm and also at each branch of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the firm was only entitled to registration with effect from the last-mentioned date, there being no partnership deed in operation from January 1, 1953, to July 1, 1953. It appears that before the Tribunal the assessee prayed for production of two documents, viz., one dated December 31, 1952, and the other dated January 1, 1953. It is claimed that by the first of these documents the retirement of two partners with effect from December 31, 1952, was recorded and by the latter executed by the six continuing partners and the new partner it was provided that these seven partners would carry on the business of the firm with effect from January 1, 1953, and that a new instrument of partnership would be drawn up as quickly as possible and until execution of such an instrument the partnership would be covered by the agreement dated January 1, 1953. The Tribunal declined to entertain or admit these documents at the hearing before it. If these documents were in existence the recitals in the supplementary deed are wholly inexplicable. Not only is there no mention of any document of the kind which the assessee wanted to place before the Tribunal, but the supplementary deed of partn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egistration under section 26A might be made not only by a firm which came into existence as from the date of a written agreement but also one created by word of mouth but subsequently clothed in legal form by reduction of the terms and conditions of the partnership to writing. By a majority the Supreme Court further held that unless the partnership business was carried on in accordance with the terms of an instrument of partnership, which was operative during the accounting year, it cannot be registered in respect of the following assessment year. But at the same time the court made it clear that they were not concerned with the further question whether the document should be in existence at the very inception of the accounting year, or before the year is out. In the case before us the accounting year ended on December 31, 1953, the assessment year being 1954-55. We are not concerned with the question whether registration under section 26A could be had for the whole of the said accounting year as the reference is directed to the period of six months from January 1, 1953, to July 1, 1953, and our attention must be confined to that period only. Under the Income-tax Act fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control of the Central Government, make rules for carrying out the purposes of this Act and for the ascertainment and determination of any class of income. Under sub-section (5) of section 59 rules made under this section shall be published in the Official Gazette and shall thereupon have effect as if enacted in this Act . Rule 2 provides that any firm constituted under an instrument of partnership specifying the individual shares of the partners may, under the provisions of section 26A of the Indian Income-tax Act, 1922,...register with the Income-tax Officer, the particulars contained in the said instrument on application made in this behalf . The rule further provides that such application shall be signed by all the partners...personally, or in the case of a dissolved firm by all persons... who were partners in the firm immediately before the dissolution and by the legal representative of any such partner who is deceased, and shall, for any year of assessment up to and including the assessment for the year ending on the 31st day of March, 1953, be made before the 28th February, 1953, and for any year of assessment subsequent thereto, be made-- (a) where the firm is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 26A of the Indian Income-tax Act: Haridas Premji v. Commissioner of Income-tax A.I.R. 1932 Cal. 409. More often, however, persons desiring to unite carry on oral negotiations which are then reduced to writing in the form of a deed of partnership. It may well happen that even when the parties have settled all the terms by which they are to be bound and have agreed to carry on business in pursuance thereof the drawing up of the formal document takes place some time afterwards. In such a case the partners may claim registration as from the date when they enter into the agreement to carry on the partnership orally and can have the firm registered under section 26A if the rules mentioned above are complied with but unless it is established to the satisfaction of the Income-tax Officer that there was an oral agreement which preceded the formal document the Income-tax Officer can only go by the document. In Dwarkadas Khetan Co. v. Commissioner of Income-tax [1956] 29 I.T.R. 903, an instrument of partnership was executed by four persons on March 27, 1946. Clause 3 of the deed of partnership recorded that the partnership shall be deemed to have commenced from January 1, 1946, and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The shares of the partners were specified in the document. Subsequently, on July 25, 1951, the same persons including the minor purported to execute another deed of partnership. By yet another document dated February 28, 1952, described as a deed of rectification of the deed of partnership dated July 25, 1951, it was declared by the four major partners that Rabindra Nath Prodhan was only a minor admitted to the benefits of the partnership till he attains majority. An application was then made for registration of the partnership business. The Income-tax Officer rejected it on the ground that the minor had not merely been admitted to the benefits of partnership. The Income-tax Tribunal upheld this order. One of the question framed for decision by the court was whether, on the facts and in the circumstances of the case, registration under section 26A should have been granted to the firm as constituted by the deed dated July 25, 1951, and the deed of rectification dated February 28, 1952, for any one or more of the assessment years 1951-52, 1952-53 and 1953-54. The Orissa High Court held that the Tribunal had failed to consider the effect of the deed of rectification. It found that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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