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TMI Blog1973 (10) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership. The Income-tax Officer held that according to the partnership deed the were not only admitted to the benefits of Partnership out were made full fledged partners and accordingly he came to the conclusion that the agreement was not registrable tender section 185 of the "Income-tax Act, 1961. The assessee went up in appeal, but the appeal was dismissed by the Appellate Assistant commissioner. The assessee then went up in appeal before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal holding that the partnership deed had created a valid partnership between the two major partners and had only admitted the two minors to the benefits of partnership. The Tribunal, therefore, directed the department to grant registration to the firm. The department, feeling aggrieved, got the aforesaid two questions referred for our opinion. The relevant clauses of the partnership deed are in the following terms : " 1. That the name of the partnership shall be Uttam Kumar Promod Kumar, Commission Agents, Auraiya, District Etawah, and the share of each party shall be as under : Rameshwar Dayal, party No. 1 0-4-0 out of a rupee Goverdhan Das party, No.2 0-4-0 out of a rupee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement through their guardians. Section 30(1) of the Indian Partnership Act says that a minor may not be a partnerin a firm, but, with the consent of all the partners for the time being, be may be admitted to the benefits of partnership. Sub-section (5) of the section provides that a minor, within six months of his attaining majority, give public notice that he has elected to become or not to become a partner. The proviso to this sub-section says that if he fails to give such notice, he shall become a partner on the expiry of the said six months. From the above provisions an inference can legitimately be drawn that a minor, for all practical purposes, when admitted to the benefits of partnership, becomes a partner but does not enjoy the rights or suffer the liabilities Of the partner till he attains majority. This leads to the further inference that even for admission of the minor to the benefits of partnership an agreement is required between him and the existing partners. The minor's property and funds can be utilised by the firm and for that purpose also it is essential that there should be an agreement on behalf of the minor with other partners. In our opinion, any agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for a minor being admitted to the benefits of partnership by a unilateral act of the partners, a situation may arise where the partners may get the benefit under the Income-tax Act but refuse to give any benefits to the minor, as without the minor's guardian being a party to the agreement the minor will not be able to claim the profits of the partnership clue to lack of privity of contract. It cannot also be imagined that the money of the minor can be given to the partnership without the agreement about it in terms being settled and agreed between the minor's guardian and the partners. We thus come to that conclusion that the present deed of partnership by having not been signed by anyone on behalf of the minors was not registrable as far as it concerned the rights and liabilities of the minors. Further, as the terms of the documents are not such that tile agreement might be divided so as to keep the interests of the major partner separate from the benefits to be conferred on the minors and liabilities to be incurred by them, the document cannot be, registered even in part; and the entire document must be held to be unregistrable. Coming to the terms of the deed of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed two questions : "(1) Does this deed then make the minors full partners or does it only confer benefits of partnership on them ? (2) Is any clause of the deed void? " The observation of the Supreme Court is in the following terms : "First it is clear from sub-section (2) of section 30 of the Partnership Act that a minor cannot be made liable for losses." The Supreme Court further observed : It follows from the above discussion that as long as a partnership deed does not make a minor full Partner, a partnership deed cannot be regarded as invalid on the ground that a guardian has purported to contract on behalf of a minor if the contract is for the purposes mentioned above." It is not stated anywhere in the judgment either that in fact the partnership deed provided for the suffering of loss by minors or that the provisions in the agreement court not be made of loss being borne by minors even when it was intended to admit the minors only to the benefits of partnership. Dealing with this case, this court in the case of Dharain Chand Khedar Nath v. Commissioner of Income-tax observed as under : " In the Supreme Court case there was, however, no clause as in the instant case r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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