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TMI Blog1982 (11) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the strength of a partnership deed executed on 6th of June, 1964. It had filed an application for registration in Form No.11 of the I.T. Rules. It also satisfied all other necessary conditions for a valid partnership. But the ITO was not satisfied with regard to the validity of the partnership because out of seven partners two were Hindu deities-Netai Gourji (by shebait Lingaraj Paikara) and Broja Ballav Jew (by shebait Lingaraj Paikara). According to the ITO, Hindu deities were " perpetually infant " and they could not enter into partnership. He, accordingly, refused registration to the assessee-firm. In order to appreciate this order, it would be necessary to refer to the relevant clauses of the partnership deed, which is dated 6th June, 1964. This deed is between seven contracting parties, of which two, as we have mentioned before, were Hindu deities, namely, Sri Sri Netai Gourji represented by Shebait Lingaraj Paikara of the Sixth Part and Sri Sri Broja Ballav Jew represented by Shebait Lingaraj Paikara of the seventh part. The partnership deed set out the history and, thereafter, continued to state that the parties had been continuing and were carrying on the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when Hindu deities were capable of holding extensive properties they could also become partners in firms. He accordingly allowed the appeal of the assessee. The Revenue being aggrieved by the said order went up in further appeal before the Tribunal. The Tribunal discussed the rival contentions of the parties and came to the conclusion that a Hindu deity was a juristic entity and could certainly become a partner. The Tribunal accordingly upheld the order of the AAC. Upon the findings of the Tribunal, two questions mentioned hereinbefore have been referred to us. In order to answer the questions, it is necessary to consider the question posed before us, whether a Hindu deity cannot enter into partnership. It was contended that in view of the limitations and the circumstances under which a shebait was obliged, according to the well-settled principles and decisions, to hold the properties of deities on behalf of the deities, it was impossible to comprehend that such properties could be the subject-matter of obligations of partnership and, as such, it was submitted that the deities were not capable of entering into any kind of partnerships. It was also contended that shebaits as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the gift as in the case of secular gifts. Reference was also made to page 186 of the decision where the court summed up the position of the Hindu law and to the legal character in respect of shebaitship. After discussing the above position, the Calcutta High Court summed up as follows (p. 188), " In the light of the above exposition of the law, the position of person in charge of Shiv Krishna debutter estate appears to be as follows : He is a mere custodian of the property. It is his duty to carry on all the functions of deb seva puja, etc., the periodical rites and ceremonies in accordance with the scheme laid down in the deed and to preserve the debutter property. Though not liable to render any account to anybody, he is to spend the income of the property towards deb seva work and repairs, etc., only, and invest the surplus in purchasing property to be made debutter. He has only a limited right of residence in some of the debutter properties. So far as the properties covered by the arpannamah are concerned, the founders renounced all their right, title and interest in them. The properties were dedicated for ishwar deb seva, etc., they were dedicated in favour of the deities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act is that, if the Income-tax Acts are examined, it will be found that the person charged with tax is neither the trustee nor the beneficiary as such, but the person in actual receipt and control of the income, which it is sought to reach. These observations were made in the context of quite different set of circumstances and they do not mean and were never intended to mean that proceedings could be launched under section 9 on person who was not the owner of the property but could be assessed to income from the property because he was in receipt thereof. If section 9 is to be resorted to, assessment can only be made in the hands of the owner, although the payment of the tax may be made through the hands of somebody else. Our attention was also drawn to a judgment of a single judge of this court in Sri Sri Sridhar Jiew v. Income-tax Officer [1963] 50 ITR 480, which relates to this very debutter estate. There, an application was made under article 226 of the Constitution by the deities, Sri Sri Sridhar Jiew and Sri Sri Radharaman Jiew, in the hands of Pulin Chandra Daw as shebait. There, because of the decision of the Income-tax Appellate Tribunal that Pulin Chandra Daw had no benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ait of a Hindu deity, and the view that the Indian I.T. Act, 1922, did not provide a machinery for the assessment of, or realising the tax from, a Hindu deity was not correct. It was, according to the Division Bench, competent for a shebait to sign a form of the return on behalf of the deity. Such signature should be taken to be the signature of the deity, who could hold property and receive income but who could not be equated with an ordinary human being. In expressly including a juristic person within the net of taxation and in amending the form of return, the 1961 Act had done nothing but bad made clear what was always the law. Reference was also made to the decision of the Supreme Court in the case of Official Trustee of West Bengal v. CIT [1974] 93 ITR 348, where the Supreme Court held that the Hindu deity was an " individual " within the meaning of the word in s. 3 of the Indian I.T. Act, 1922, and could be treated as a unit of assessment. As a Hindu deity was a juristic person and could hold property and be in receipt of income and could also sue and be sued in a court of law, there was no reason why its income should also be held to be outside the ambit of taxation, if it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and registered as such, under s. 26A, nor could a wakf or infant partners be treated as partners in a loose sense in such cases and the partnership be considered as one that could be registered under s. 26A. Where an application was made for registration of a firm, the ITO had power to determine whether the partnership which was alleged to exist really existed and to refuse registration, if it did not exist. Here, in the said decision, our attention was drawn to the observations of Mr. justice Costello at pages 196 and 200. We have examined the partnership deed in this case. We find that the partnership assets have been made liable, in view of the provisions of clauses which we have mentioned hereinbefore, to alienation not only confined to the case of legal necessity but also for ordinary losses of partnership. Thus, the partnership assets would also include the income derived from the assets of the deity and which have been brought into the capital of the firm. In that view of the matter, it appears that such a deed, which permitted alienation or which contemplated alienation of assets of the deity not only confined to legal necessity but also for other purposes would be bad ..... 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