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TMI Blog1961 (8) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... 036 Total 100 2. The application was signed by K. Veeresalingam, K. Nagendra Rao, K. Sathaiah and V. Narayana. The assessment year was 1955-56 and the accounting year for the relevant assessment year was from November 7, 1953, to October 26, 1954. The deed of partnership on which reliance was placed for the purpose of registration under the Indian Income Tax Act was dated December 12, 1953. The Income Tax Officer rejected the application. On appeal, the order of the Income Tax Officer was confirmed by the Appellate Assistant Commissioner which in its turn was confirmed by the Income Tax Appellate Tribunal, Hyderabad Bench. On an application filed by the assessee to the High Court, the Tribunal referred the above question for decision. The material portions of the deed of partnership dated December 12, 1953, on the basis of which the renewal of the registration is prayed for are as follows : "This instrument of partnership executed on the 12th day of December, 1953, by and between : 1. Kylasa Sarabhaiah, a firm constituted under an instrument of partnership dated 20th February, 1952, consisting of the following members : (a) Kylasa Veeresalingam, aged 41 years. (b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the benefits of the partnership evidenced by the deed of partnership dated February 20, 1952. It was also recorded in that deed of partnership dated February 20, 1952. It was also recorded in that deed that each of them was entitled to an equal share in the profits which comes to 1/7th share in the profits. But in the deed of partnership dated December 12, 1953, which is the partnership in question in this case, the shares of Kyalsa Veeresalingam and Kylasa Nagendra Rao are shown to be equal and to amount to a nine annas share in all. 4. The question for decision in this case is whether the assessee is entitled to a renewal of the registration of the firm under section 26A of the Act for the assessment year 1955-56. Section 26A is as follows : "26A. Procedure in registration of firms. - (i) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der an instrument of partnership dated February 20, 1952, consisting of (a) Kylasa Veeresalingam; (b) Kylasa Nagendra Rao, with five minor brothers admitted to the benefits of the partnership, (2) Kolluri Sathaiah and (3) Veeravalli Narayana. In view of the decision of the Supreme Court above referred to, this partnership evidenced by the instrument dated December 12, 1953, is illegal and is not a partnership at all which can be recognised either under the Indian Partnership Act or under the Indian Income Tax Act. 7. But then, it is contended by the learned counsel for the assessee that though in the concerned deed of partnership one of the partners is shown as Kylasa Sarabhaiah firm, it is really the partners constituting that firm under the partnership dated February 20, 1952, that they are the partners individually under the partnership dated December 12, 1953, which is sought to be registered under the Act. It is pointed out that in the partnership dated December 12, 1953, all the major partners have signed and that, therefore, it must be taken that all the partners of Kylasa Sarabhaiah firm are also partners in the partnership in question individually having equal shares and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners, the learned Chief Justice held that these individual shares could be ascertained by referring to their shares as specified in the respective deeds of partnership of the two firms and that such a course was permissible under section 26A of the Act. 10. But, on a reading of the instrument of partnership in the present case, we are unable to hold that this is a partnership between the constituent members of Kylasa Sarabhaiah firm and the other two individuals mentioned in this deed. It is specifically stated that the first partner is Kylasa Sarabhaiah, a firm constituted under the instrument of partnership dated February 20, 1952, and the two others are Kolluri Sathaiah and Veeravalli Narayana. This deed does not purport to be one as between the individual constituent members of Kylasa Sarabhaiah firm and two others. When signing this deed of partnership also, the signature of the firs partner purports to be on behalf of Kylasa Sarabhaiah firm and not by its constituent members as individuals. Therefore, we hold that the partnership, which is sought to be created by the deed dated December 12, 1953, cannot be recognised in law and cannot be registered under section 26A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to ascertain the individual shares of the members of this firm which is now sought to be registered. What all was decided by the High Court of Bombay in Chhotalal Devchand v. Commissioner of Income Tax was only that an instrument of partnership should be constituted by one or several documents and that what section 26A requires is only that the documents which constitute the instrument of partnership must specify the shares of the partners and that is is not necessary that the shares must be specified in one document along with the other terms of the partnership. If this decision intended to hold that, in order to ascertain the individual shares of several partners, it is permissible to refer to the earlier deed of partnership, we must express our respectful dissent from it. Such a view is opposed to the decision of the High Court of Madras in Kannappa Naicker & Co. v. Commissioner of Income Tax above referred to and, in our opinion, will not also be in accordance with the decision of the Supreme Court in Dulichand Laxminarayan v. Commissioner of Income Tax. Therefore, we hold that the firm in question in this case cannot be registered under section 26A of the Act for the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irm in that case could not be registered under the under the Indian Income Tax Act. Following this decision of the Supreme Court, we hold that the assessee firm in the present case before us also cannot be registered under section 26A of the Indian Income Tax Act. Following this decision of the Supreme Court, we hold that the assessee firm in the present case before us also cannot be registered under section 26A of the Indian Income Tax Act. In R. C. No. 37/59, we hold that, on the facts and circumstances of this case, the assessee is not entitled to registration under section 26A of the Indian Income Tax Act. 16. The facts in R. C. No. 34/59 are similar to the facts in R. C. No. 37/59 though the deed of partnership relating to the assessee firm in this case is dated the 15th of May, 1955. In this deed of partnership also the first partner is described as "Kylasa Sarabhaiah, a firm constituted under an instrument of partnership dated 12th May, 1955, consisting of Kylasa Veeresalingam and with minor brothers and four others. The share of the first partner, Kylasa Sarabhaiah firm is specified as 0-6-9. In this case also, on a proper construction of the instrument of partnership ..... X X X X Extracts X X X X X X X X Extracts X X X X
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