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TMI Blog1987 (3) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... 74, and that application was signed only by the two major partners. The Income-tax Officer found that the application was defective inasmuch as it was not signed by all the major partners on the date of the application. He also further found that the consent of the guardian in respect of the other minors admitted to the benefits of the partnership was not obtained. He, therefore, called upon the firm to take immediate steps for curing the defects pointed out by him. But the firm did not respond to the notice. It appears, there were some differences and misunderstandings amongst the partners. The Income-tax Officer refused to grant continuation Of registration. The Appellate Assistant Commissioner, on appeal, confirmed the order of the Income-tax Officer. An additional ground was also pointed out by the Appellate Assistant Commissioner: the claim for registration as originally granted could not continue with the same terms in view of the change in the constitution of the firm and, therefore, the declaration made in Form No. 12 was defective. Relience was placed for this view on the judgment of the Allahabad High Court in Addl. CIT v. Uttam Kumar Promod Kumar [1974] 97 ITR 730. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the natural guardian of a minor to sign an instrument of partnership. Section 30 of the Partnership Act deals with minors admitted to the benefits of a partnership. Sub-section (1) lays down that a minor may not be a partner in a firm ; but, with the consent of all partners for the time being, he may be admitted to the benefits of partnership. The minor has right, by sub-section (2), to such share of the property and the profits of the firm as may be agreed upon and he can have access to and inspect the accounts of the firm. The minor's share, by sub-section (3), is liable for the acts of the firm but he is not personally liable for any such acts. The minor has no right to sue the partners for an account or payment of his share of the property or profits of the firm except when severing his connections with the firm and in such a case, sub-section (4) lays down that the amount of his share shall be determined on valuation made as far as possible in accordance with the rules contained in section 48. Under sub-section (5), the minor, at any time within six months of his attaining majority, or of his obtaining knowledge that he had been so admitted to the benefits of the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m at any time during the previous year up to the date of the application, in relation to the whole or any part of his share in the income or property of the firm, is a benamidar of any other partner to whom he is not related as a spouse or minor child. The signature of all the partners on this Form No. 11A is mandatory. There is no column in Form No. 11A requiring either the signature of the minor or that of a natural guardian of the minor. The procedure on receipt of application is contained in section 185 of the Income-tax Act. Sub-section (2) of section 185, which is material, says that where the Income-tax Officer considers that the application for registration is not in order, he shall intimate the defect to the firm and afford an opportunity to the firm to rectify the defect within a period of one month from the date of such application and if the defect is not rectified within that period., the officer shall, by order in writing, reject the application. From the aforesaid provisions of the relevant law, it is clear that no obligation is cast on the minor to sign on the application seeking registration for the purposes of the Income-tax Act; nor is there any such obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the minor to the benefits of Partnership, an agreement is required between him and the existing partners. " (Emphasis supplied) With great respect to the learned judges of the Allahabad High Court, we express our regret to agree with the aforesaid view. As already noticed there is no provision in section 30 of the Partnership Act requiring an agreement either between the minor or between the natural guardian acting for and on behalf of a minor and other partners. When a minor is not required by law to be admitted as a partner of a firm, the question of an agreement between him and the other partners does not arise. It must also be remembered that a minor is incapable, under the law, to enter into a contract. The reasoning of the Allahabad High Court is that if a minor is admitted to the benefits of a partnership, by the unilateral act of partners, a situation may arise where the partners may refuse to give the benefits to the minor if the minor's guardian is not a party to the agreement. The minor may not be in a position to claim the profits of the partnership because of absence of privity of contract. The view of the Division Bench of the Allahabad High Court was approved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by law. Where partnership deed stated that a minor was admitted to the benefits of partnership and the natural guardian of the minor signed on behalf of the minor in the deed of partnership, the question arose before the Bombay High Court in CIT v. S. Moonalal Co. [1976] 104 ITR 688, whether the minor was a contracting party to the document. The Income-tax Officer in that case held that the minor was a party to the document and, therefore, it was vitiated. The Appellate Assistant Commissioner, on appeal, expressed the view that the minor was only admitted to the benefits of the partnership and that the deed was signed by the guardian of the minor only as a witness. The Tribunal confirmed the view of the Appellate Assistant Commissioner. The matter was referred to the Bombay High Court at the instance of the Commissioner of Income-tax. After examining the recitals in the partnership deed, the High Court held that (at pages 690 and 691): " In view of the aforesaid recital and aforesaid provisions, which are to be found in the operative part of the documents, it is more than clear that the minor was merely admitted to the benefits of the partnership and was not made a full-fledged ..... X X X X Extracts X X X X X X X X Extracts X X X X
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