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TMI Blog1959 (2) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... " Section 26A of the Indian Income-tax Act, 1922, reads as follows : "(1)Application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument 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. (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 6B of the Indian Income-tax Rules, 1922, deal with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for all." As pointed out by Lindley in his treatise on the Law of Partnership, when a statutory definition is provided by the Legislature that definition taken in connection with the other sections of the Act "must for the future be the ultimate test applicable to the determination of the question whether in any particular case a partnership does or does not exist." (11th Edition, page 28) A translation of the instrument concerned forms part of the paper book. There are three parties thereto, one Pathrose, and his brother and son, Devassy, and Kochu Devassy respectively. The clauses on which reliance is placed by counsel for the Department for the contention that the instrument does not create a partnership are clauses 7 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eems to offend against both the principles. It is unnecessary to go into the details, but taking the two outstanding points it is clear that whatever contractual relations existed between the father and the sons the result was certainly not a partnership in law. The father has been given the right to exclude either or both the sons from the management of the firm wholly or in part, or to entrust the management to any other person. Sir Jamshedji relies on cases where there are dormant partners or arrangement is made that a particular partner shall be in the management thereof; but they are all cases where partners agree that a particular partner shall manage and that another person should get a share in the profits without being under an obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs shall remain dormant-and accepted by Chagla, C.J., as not militating against the existence of a co-partnery. The contention that the right of exclusion embodied in clause 7 precludes the creation of a partnership is equally unsustainable. In B.R. Naik v. Commissioner of Income-tax [1945] 13 ITR 124 an instrument somewhat similar to the one before us came up for consideration. The head note states the relevant details and conclusion as follows : "R carried on business as a general merchant in South Africa. By a deed of 1937 R admitted his three managers as partners in his business. The managers were not to be disclosed as partners so far as the public was concerned and were to be held out at managers of the business and were to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Pathrose may have to be considered as void and of no effect. It does not follow that the relationship created by the document is not a partnership between the parties thereto. The Appellate Tribunal dealt with the contentions of the Department as follows : "We will now go through the reasons given by the Appellate Assistant Commissioner which prompted him to ignore the order of the Tribunal in regard to the preceding year. One is the competency given to one partner to exclude the other two partners from the firm at any time; the second is the conduct of the business being left in the hands of one of the partners and the possession of the cash balance and the books of accounts in the hands of one of the partners. These the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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