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TMI Blog1968 (4) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 1958-59, the prayer was refused by the Income-tax Officer. The order of the Income-tax Officer was confirmed by the Appellate Assistant Commissioner, on appeal by the assessee. Thereupon, the assessee took a second appeal before the Appellate Tribunal. At the time when the application for renewal of registration was refused by the Income-tax Officer and the said order was confirmed by the Appellate Assistant Commissioner, the Supreme Court judgment in Commissioner of Income-tax v. Dwarkadas Khetan Co. was holding the field. Before the Appellate Tribunal the assessee contended that the Supreme Court decision in Dwarkadas Khetan Co.'s case had no application to the facts of the present case, inasmuch as under the deed of partnership, dated May 14, 1956, the minors had been admitted only to the benefits of partnership and had not been made responsible for the losses. The Tribunal overruled the contention with the following observations : " It is true that the deed recites in clause 6 that the parties of the 2nd, 4th, 5th, 6th, 7th, 8th, 9th, 10th and 11th part, who were minors, shall not be liable or responsible for the losses, if any, and the entire loss shall be borne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of law in Commissioner of Income-tax v. Dwarkadas Khetan Co. came up for explanation before the Supreme Court in Commissioner of Income-tax Shah Mohandas Sadhuram and again in Commissioner of Income-tax Shah Jethaji Phulchand. He submitted that if the statement of law in Dwarkadas Khetan Co.'s case be read with the explanation thereof in the two later Supreme Court decisions, it would be amply apparent that the refusal of the registration of the assessee-firm, on the grounds as stated in the judgment of the Tribunal, was clearly wrong. This argument necessitates an examination of the trilogy of decisions by the Supreme Court. In Dwarkadas Khetan's case the Supreme Court held that the Income-tax Officer was only empowered to register a partnership which was specified in the instrument of partnership and it was not open to him to register a partnership different from that which was formed by the instrument. It was further held that section 30 of the Indian Partnership Act was designed to confer equal benefits upon the minor by treating him as a partner but it did not render a minor a competent and full partner, and any document which made a minor full partner could not be regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but the agreement would remain valid as long as it was not so avoided. Lastly, the Supreme Court observed that the guardian was entitled to assent to the mode of keeping accounts. The decision in Shah Mohandas Sadhuram's case is also an authority for the proposition that the duration of the partnership had to be fixed between the major members, and the guardian on behalf of the minor might agree to accept the benefits of the partnership only if the duration was also to the benefit of the minor. In the case of Jethaji Phulchand the Supreme Court followed the case in Shah Mohandas Sadhuram and repeated that a partnership deed must be reasonably construed. The Supreme Court further said that the guardian of a minor was entitled to do all things necessary for effectuating conferment of benefits of partnership to the minor. The Supreme Court also observed that a guardian might agree on behalf of the minor to contribute capital for the business of the firm in which the minor was admitted to the benefits of partnership. Lastly, the Supreme Court observed that there was no bar in law to the guardian of a minor agreeing to the starting of a business and the constitution of a firm on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of this court referred to above, we have now to examine the reasons given by the Tribunal in support of non-registration. The first ground given by the Tribunal was that the preamblee recited that the parties, including the minors, agreed between themselves to become partners and to carry on the business of partnership. This ground, in our opinion, should not be over-emphasised, because in the deed of partnership in Shah Jethaji Phulchand case the preamble recited : " 3. Whereas the above 5 parties have agreed to do business of cotton and kapas, purchases and sales and on commission basis, etc., after Deepavali, 1950, for the future periods also so long as they can possibly work together. 4. Now they agree between the above 5 parties as hereunder : (1) That the above five parties shall establish cotton business, and carry on the same at Devangere with branches in the surrounding areas under the name and style 'Jethaji Phulchand'. " The "five" mentioned in the preamble included the minors. In spite of this preamble the Supreme Court was pleased to hold that the partnership deserved registration. The next ground relied on by the Tribunal was that by clause 4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... everything necessary for effectuating conferment of benefits of partnership upon the minor. If adjustment of account in a particular manner was necessary for determining the benefits receivable by the minors, the guardians of the minor were entitled to put their signature at the time, of such adjustment if so required. Then again, the word "partner", as used in the above clause, is referable to major partners, who could contract to become partners and not to minors admitted to the benefits of partnership. The fourth ground, on which the Tribunal relied, was that clause 7 of the partnership deed recited that the bank accounts shall be operated on by any two of the partners for and on behalf of the partnership as may be, decided by the partners. The Tribunal interpreted this clause, to mean that even the minors would have to decide which of the two partners could operate the bank account. In our opinion, this view was wholly wrong. The partners mentioned here refer to the persons who could contract to become partners and not to those who became entitled to the benefits of the partnership. The last ground, relied on by the Tribunal, was that the other clauses in the deed also ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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