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TMI Blog1984 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... terms, the assessee paid to the vendors by way of reimbursement a sum of Rs. 1,45,823.38 representing the expenditure incurred by the latter in raising the coffee crop from April 1, 1972, till the estate was sold. 3. For the asst. yr. 1973-74, the assessee-firm, a return declaring an income of Rs. 1,21,588.22 and also applied for registration of the firm. The assessee claimed deduction, among other items, of the sum of Rs. 1,45,823.38 reimbursed to the vendors towards the expenditure incurred by them. The assessing officer granted registration to the firm, allowed the deduction and completed the assessment with allocation of the income among the twelve partners in the ratio of their respective shares and determined the tax payable by each of them. 4. The CIT was of the opinion that the assessment was prejudicial to the interests of the Revenue. He, in the exercise of his revisional power under s. 35 of the "Act", initiated proceedings calling upon the assessee to show cause why the registration granted to the firm should not be cancelled, since the application for registration was not in accordance with r. 13 of the Karnataka Agrl I.T. Rules, 1957 (the "Rules"). He also call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture. 8. The question is whether it could be disallowed while computing the income from the agricultural crop of that year. Under s. 3, the income of the previous year relevant to the assessment year is required to be brought to tax. Under s. 5 the computation of that agricultural income is required to be made by allowing the expenditure laid out or expended wholly and exclusively for the purpose deriving the agricultural income. It follows from these provisions, that the expenditure incurred for deriving the agricultural income must be deducted while computing the income for taxing purpose. This Court in Ummer Plantations vs. State of Karnataka, C. R. P. No. 2948/80 disposed of on March 1, 1984 (since reported in (1984) 43 CTR (Kar) 248 : (1984) 148 ITR 564 (kar)), observed that if the income derived from estate is taxed in the hands of the purchasers, then the expenditure incurred for deriving that income should be allowed irrespective of the fact whether it was incurred before the estate was sold or subsequent to the sale. In other words, what is relevant to consider in such a case is as to how much was really spent for deriving that agricultural income and not who spent th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the Rules would be sufficient to grant registration and since ten of the partners have signed personally and on behalf of the remaining two partners, their power of attorney-holders have signed, it should be taken that the application for registration was in order and the registration granted to the firm at any rate ought not to been cancelled by the CIT. The validity of the contention turns upon the provisions prescribed for registration of firms. Sec. 29 provides : "29. Procedure for registration of firms.-Application may be made to the Agrl. ITO 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. (2) The application shall be made by such person or persons, and at such times and shall contain such particular and shall be in such form, and be verified in such manner, as may be prescribed, and it shall be dealt with by the Agrl. ITO in such manner as may be prescribed." Rule 13 prescribes : "13. Procedure for registration of firms under s.29.-An application under s. 29 shall be signed by all the partners (not being minors) personally, and shall be m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minors). 14. It will be seen from these rules that the legal requirement for granting a certificate of registration to a firm or renewal of such a certificate is that the application must be signed by the partners personally (if not minors). The law lays down this condition to enable the assessee to claim the benefit of s. 29. The question is whether a substantial compliance with the rules is sufficient or the requirement prescribed thereunder is mandatory. This question need not be examined in detail since on the analogous provisions under the Indian I. T. Act, 1922, we have got a decision of the Supreme Court. 15. Sec. 29 of the Karnataka Agrl. IT Act, 1957, is similar to s. 26A of the Indian IT Act, 1922. The application for registration prescribed under s. 26A of the Indian IT Act, 1922, also required that it should be signed by the partners personally. That provision is similar to r. 13. In Rao Bahadur Ravulu Subba Rao vs. CIT (1956) 30 ITR 163 (SC), the Supreme Court, while repelling the contention that such an application could be signed by his agent, observed: "Thus, if a firm is registered, it ceases to be a unit for purposes of taxation and the profits earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention was urged before the CIT, but he has rejected it on the ground that there is no provision in the Act or the Rules providing for an opportunity to the assessee to remove the objections in the application for registration. 19. Mr. Sarangan urged that if the assessee had come to know that all the partners ought to have signed personally and if it had been pointed out by the assessing officer, then those defects would have been removed by securing the signatures of those two persons. Since the assessing officer accepted the application and granted registration, there was no occasion for the assessee to rectify the defects. The counsel also urged that a statutory authority which is authorised to entertain an application is also charged with the duty to afford an opportunity to the applicant to rectify the error or remove the objections, if any, in the application. Such a power, according to the counsel, is incidental to the power to receive and dispose of the application and to effectuate the intent of the Legislature in granting registration to the firm. The counsel also referred to r. 13 which, according to him, contains liberal provisions unlike the provisions under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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