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TMI Blog1958 (3) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment where in so construing it does not deprive the Department of revenue and it saves the assessee from a palpable injustice. Now, the facts are that the assessee firm sought registration and it was denied registration by all the three authorities-the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal. It was in existence and registered under the Indian Income-tax Act from 1945 and the registration which was refused was for the assessment year 1954-55. It is rather significant that it is conceded by the Department that the partnership which is sought to be registered is a genuine partnership. It is conceded by the Department that every document on which the assessee relies for the purpose of registration is a genuine document; and yet it is urged that because of a certain aspect of law which was not present to the mind of the Department for all these years, it is entitled to refuse registration in the assessment year 1954-55. Undoubtedly, if the law permits the Department to go back upon an accepted position from 1945 that the partnership was entitled to be registered, then it can do so. But we must very carefully scrutinise the provisions of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eement of partnership is being arrived at between three parties and the three parties are the partnership firm of Karsondas Premji, the partnership firm of Chhotalal Devchand and an individual by the name of Padamsey Premji. But it is important to note that in the recital the names of the four partners constituting the firm of Karsondas Premji and the names of the two partners constituting the firm of Chhotalal Devchand are set out and it is equally important to note that the partnership deed is signed by all the seven partners. Clause 4 of the partnership deed provides that the capital of the partnership shall be contributed equally by the parties to the extent of ₹ 1 lakh by each of them. Clause 7 nominates one partner each on behalf of the firms of Karsondas Premji and Chhotalal Devchand as the representative who will manage these partnership businesses. Clause 8 provides that the partners shall divide the profits and bear the losses in equal shares; and clause 11 provides for arbitration, which includes arbitration between a partner and the executor or administrator of another partner. Now when the assessee made the application on the 27th of November, 1954, it did not an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm and some other person is rendered impossible or becomes illegal on that ground. The view which the court takes in such a case is that the firm is nothing but an association of individuals, and that when such an association under a firm name enters into partnership with another individual it is not the aggregate that combines with the individual but the individuals composing that aggregate. The same consideration applies to the case of a firm which purports to enter into partnership with another firm. What in fact and in law takes place is that the partners composing one firm join with partners composing another firm as individuals and thereafter all of them carry on business in some collective name. Now, the Supreme Court judgment in Dulichand's case (supra )came up for consideration before a Bench of this court in Commissioner of Income-tax v. Shantilal Vrajlal [1957] 31 ITR 903 and at page 907 it was observed in the judgment as follows: It is perfectly true that the Supreme Court has pointed out that a firm is not a person and that a firm cannot enter into a partnership with an individual because the Partnership Act requires that the contract of partnership must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before this court in the case of Commissioner of Income-tax v. Shantilal Vrajlal [1957] 31 ITR 903 and there we held that the mere fact that in the account books of the partnership the profits were not taken into the accounts of the constituent members but were only taken into the accounts of the two firms and the two individual partners was immaterial as the partnership deed clearly showed how the profits Were to be divided between the constituent members of the two firms and ascertainment of the exact amount due to each of the constituents was merely a matter of arithmetical calculation. The third ground which has been strongly pressed by Mr. Joshi is that the partnership deed does not specify the individual share of the partners. Now it is perfectly true that under section 26A it is the instrument of partnership which must specify the shares of the partners, and unless the instrument of partnership so specifies, the firm cannot be registered on the basis of that instrument of partnership. What is urged here is that the partnership deed specifies the shares of the partners as equal. In other words, the two firms and the individual had equal shares in the profits. But, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y section 26A of the Act read with rule 2. With very great respect to the Supreme Court, we take it that when the court speaks of shares being specified in the deed, they are referring to the instrument of partnership in the language used by the Legislature in section 26A; and again, with respect, we entirely agree that these shares must be specified in the instrument of partnership. But we do not read these observations to mean, as Mr. Joshi wants us to, that the shares must be specified in one document along with other terms of partnership. So long as the terms are specified in any document which goes to constitute the instrument of partnership, the condition of section 26A is satisfied. You may have only one instrument of partnership, in which case all the terms must be found in that instrument. But you may have more than one instrument, and if all the terms of the partnership and the shares of the partners can be gathered from various documents, then so long as the assessee is relying on these documents, there is no reason why the Department should refuse to look at any other document than the partnership deed, and also there is no reason to hold that the terms of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court plus the letter which the partner had written. It might almost be said in that case that the court was making a new contract for the partners and on the basis of the new contract was ordering registration. We do not know what Mr. Joshi would have said if we had followed the course the Calcutta High Court followed. But without going to that length and only considering the documents which are before us and which were before the Department, it is clear that from these documents all the terms of the partnership emerge and there is no doubt as to what the specific shares of each individual partner is. The position would have been entirely different if there was no partnership deed constituting the two firms which are referred to in the partnership deed of the 13th of September 1945. Then it could well have been urged that the shares are not specified in any document. The position might also have been different if no reliance was placed by the assessee on the partnership deeds of these two firms, although in the unreported judgment we showed indulgence to the assessee. But when we have partnership deeds of these two firms, when they are actually on the file, when they ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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