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TMI Blog1981 (2) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... such transfer. Therefore, with effect from May 5, 1959, only three partners remained in the firm, viz., Philips, AEI and GEC. By virtue of an order of the High Court dated August 18, 1969, the AEI merged with the GEC with effect from 20th November, 1969. From the date of the merger only two partners remained, viz., Philips and the GEC, in the firm. There was an exchange of letters in December, 1969, as a result of which the revised profit-sharing proportions between Philips and GEC were clearly spelt out in writing. The firm initially did not file an application for registration before the end of the relevant accounting year. It was later on advised that the merger. If the two partners meant, in effect, a change in the constitution of the firm within the meaning of s. 184(8) and that it should file an application in Form No. 11A which it did on 30th March, 1971, along with a letter mentioning that the fresh application for registration had been filed on the advice that there might have been a change in the constitution of the firm under s. 184(8) on the merger of the two partners as stated above. The ITO refused registration to the firm, firstly on the ground that no fresh deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] and to the Allahabad High Court decision referred to by the AAC and held that multiplicity of instruments could be treated as amounting to a deed of partnership for the purpose of registration. Reliance was placed upon the Bombay High Court decisions in the cases of A. Phiroj and Co. [1966] 59 ITR 645 and in the case of Chhotalal Devchand [1958] 34 ITR 351. And having regard to the correspondence between GEC and Philips in December, 1969, the Tribunal was of the view that the letter dated December 2, 1969, served as a fresh deed of partnership spelling out the reduction of numbers of partners to two with their fresh profit-sharing proportion. It was next held that the AAC was perfectly justified, in the facts and circumstances of the case, to condone the delay for filing the application. In the result, the departmental appeal was dismissed. On the above facts and circumstances, the Tribunal referred the following question to this court: " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the letter dated the 2nd December, 1969, which Passed between General Electric Co. of India Ltd. and Philips India Ltd. served as a fresh deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80] 124 ITR 307. In this case one of the partners of a firm who applied for renewal of registration for the assessment year 1969-70 had retired on May 17, 1968, in the relevant previous year. Thus, there was a change in the constitution of the firm and in the shares of the partners as evidenced by an instrument of partnership on the basis of which registration was granted. In view of the first proviso to sub-s. (7) of s. 184 of the Act it was held that, on the facts and circumstances of the case, the Tribunal was justified in holding that there was no effective deed in the year of account relevant to the order under appeal and hence the order passed by the ITO for continuance of registration was not in accordance with law. In both the cases, Mr. Bagchi interprets the instrument of partnership as a regular deed of partnership. According to his opinion, there cannot be any order of registration in the absence a regular deed of partnership specifying the specified shares of the partners. Next Mr. Bagchi refers to the decision of a writ application in the case of Sandersons and Morgans v. ITO [1973] 87 ITR 270 (Cal), wherein my Lord Mr. Justice Sabyasachi Mukharji rejected the writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the dissolution of partnership. On the facts and circumstances of the case, it was accordingly held that it did not follow that there was an implied agreement between all the partners of the old firm during their lifetime to continue the firm in the event of the death of any of them. Thus, the arguments of the revenue were overruled that there must have been an agreement between all the partners of the old firm during their lifetime that the said firm would not be dissolved on the death of any of them. The law on the point was clearly explained and enunciated by the Supreme Court in the case of R. C. Miller Sons v. CIT [1959] 36 ITR 194 and D. C. Auddy Brothers v. CIT reported in [1959] 36 ITR 194. It would be advantageous for us to refer to the passage at pp. 200-201 of the report (36 ITR 194), which reads as follows: " After having, thus, held that section 26A contemplated firms created or brought into existence by a deed in writing, he had no difficulty in substituting 'by' for 'under'. thus, making the crucial words 'constituted by' instead of 'constituted under'. In our opinion, the learned Chief justice fell into the error of re-constructing the provisions of the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an instrument of partnership. Such an instrument would, naturally, record all the terms and conditions of the contract between the parties which, at the initial stages, had not been reduced to writing. In such a case, though the partnership had been brought into existence by an oral agreement amongst the partners, if the terms and conditions of the partnership have been reduced to the form of a document, it would be right to say that the partnership has been constituted under that instrument. The word 'constituted' does not necessarily mean ('created' or 'set up', though it may mean that also. It also includes the idea of clothing the agreement in a legal form. In the Oxford English Dictionary Vol. II, at pp. 875 and 876, the word 'constitute' is said to mean, inter alia, to set up, establish, found (an institution, etc.)' and also 'to give legal or official form or shape to (an assembly, etc.)'. Thus, the word in its wider significance would include both the idea of creating or establishing, and the idea of giving a legal form to a partnership. The Bench of the Calcutta High Court in the case of R. C. Mitter and Sons v. Commissioner of Income-tax [1955] 28 ITR 698 under examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounting year. A reference is made in this connection to the decision of the Kerala High Court in the case of Malankara Timbers v. CIT reported in [1967] 66 ITR 200. In this case, the partnership in question was supposed to have come into existence from March 1, 1959, by means of a deed purported to have written up and signed by the partners on that date, though the stamp paper was purchased only on March 23, 1959, and the departmental authorities refused registration of the firm for 1960-61, relevant to the accounting year April 1, 1959, to March 31, 1960. On a reference, the High Court held that as there was no material to show that the partnership was factually in existence during the whole of the accounting year and all that should be said was that the deed was executed on some date between March 23, 1959, the date on which the stamp paper was purchased, and April 29, 1959, the date on which the application for registration was filed, the registration was properly refused. The letter dated December 2, 1969, is incorporated at p. 41 of the paper book. This was from Philips India Ltd. to the General Electric Co. of India, Ltd. Philips India Ltd. were to receive 49.11 % of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an exhibit in the case. Once a document has been marked as an exhibit in the case and has been used by the parties in examination and cross-examination of their witnesses, s. 36 comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial court itself or to the court of appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of superior jurisdiction. In any event of the matter, we do not find any substance in Mr. Bagchi's contention that the letter dated December 2, 1969, should have been left out of consideration as it was not properly stamped. Under this letter dated December 2, 1969, specified shares were determined between the agreeing parties. For such allotment of shares, in his opinion, the document was also to be stamped. He makes a reference to the decision in CIT v. Tribhuvandas G. Patel [1978] 115 ITR 95 (Bom). At p. 116 of the report, it is stated that under the facts and circumstances of the case it appears that, in the first place, a retiring partner while going out and while receiving what is due to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as made in good time on the date on which the original application was made. In reply, Dr. Pal draws our attention to the case reported in AIR 1931 Cal 682 [SB] (Ramlal Murlidhar, In re). It is laid down therein that though under s. 2(14) a firm to be registered must be the firm constituted under the instrument, it does not imply thereby that in order to satisfy the requirements of the firm being constituted under the instrument, a complete instrument only is intended to be valid for registration, that is to say, an instrument which does not require supplementing by other evidence but contain in itself the complete agreement constituting the partnership and by itself solely operates to create the partnership. In reply to the question raised by Mr. Bagchi as to the requirement for a partnership, Dr. Pal refers to the decision of the Supreme Court in the case of K. D. Kamath and Co. v. CIT reported in [1971] 82 ITR 680 at p. 695. It is laid down therein that two essential conditions to be satisfied are (1) that there should be an agreement to share the profits as well as the losses of the business, and (2) the business must be carried on by all or any of them acting for all, wi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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