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TMI Blog1979 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ed dated September 13, 1966, and was granted registration for purposes of income-tax. Clause 13 of the deed provided that the death or retirement of any of the partners would not operate to dissolve the firm, but that the firm may be continued by the surviving or remaining partners on such terms and conditions as may be agreed upon in writing between the partners. On February 9, 1970, Sudevan, No. 1 among the partners, died. By his registered will dated January 28, 1970, he bequeathed all his properties to his three adult sons namely : K. S. Krishnadas (No. 2 of the partners), K. S. Haridas (No. 4 of the partners), and K. S. Bhagavandas (who was not one of the partners under the deed of 1966). On February 20, 1970, a further deed of partnership was executed. The executants are, (1) K. S. Krishnadas (No. 2 in the original deed and an heir under the will of Sudevan), (2) K. A. Jayapalan (No. 3 in the original deed), (3) K. S. Haridas (No. 4 in the original deed and an heir under the will of Sudevan), (4) K. A. Mohandas (No. 5 in the original deed), (5) K. A. Haridas (No. 6 in the original deed), (6) K. S. Krishnadas (No. 2 in the original deed), and as power-of-attorney of the heirs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not refer in detail to the contents of the rule. On the facts stated by the Tribunal and set out earlier, we do not see any vitiating circumstance to justify the cancellation of the registration of the firm. That Shri R. S. Krishnadas had joined the execution of the partnership deed twice appears to us to be a circumstance which is quite easily understandable. He was a partner himself in the original deed of September 13, 1966. It was thereafter that one of the partners, K. K. Sudevan, died having constituted by his will his three sons as representatives of his estate, who were to carry on the partnership in his place along with the other partners in the original deed. This was quite permissible and quite consistent with the provisions of cl. 13 of the partnership deed as well as s. 37 of the Indian Partnership Act. In accordance with the devolution of interest, the three heirs had constituted Shri K. S. Krishnadas as their representative to carry on the business of partnership by their power-of-attorney. Shri K. S. Krishnadas joined the document of February 20, 1970, in a dual capacity, namely, as a partner himself, and as representing the three heirs of the deceased partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine this aspect of the question. This court noticed the ruling view of this court as reflected in the decisions noticed. We noticed the decision of the Supreme Court in Mandyala Govindu & Co. v. CIT [1976] 102 ITR 1, where the Supreme Court pointed out that it was necessary for the ITO to be satisfied that there was a specification of shares. After noticing the decision, the Division Bench pointed out that either on the liberal view expounded by the Supreme Court, or on the ruling view of this court, there was no ground, on the actual facts disclosed, to interfere with the refusal of registration. In this case, there is nothing to show that the officer was not satisfied regarding the specification of shares in the partnership deed. Counsel for the revenue placed reliance on the decisions in Firm Bhagat Ram Mohanlal v. CEPT [1956] 29 ITR 521 (SC) and Dulichand Laxminarayan v. CIT [1956] 29 ITR 535 (SC). We do not think these decisions actually have application. The question of a partner signing the instrument of partnership twice in two different capacities actually did not arise for consideration in any of these decisions. What was pointed out in the earlier of these cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, that if a partnership is genuine and valid, the ITO has no power to reject its registration provided the provisions of s. 26A of the 1922 Act and the Rules made thereunder are complied with. It was pointed out that the benami character of one of the partners does not affect the benamidar's capacity as partner or his relationship with the other members of the partnership. If a partner is only a benamidar for another, that can only mean that he is accountable to the real owner for the profits earned by him from and out of the partnership. Therefore, he is only a trustee of the real owner. But, in law, he is also capable of entering into a partnership with others. While discussing the question, the Supreme Court observed : " When a firm makes an application under section 26A of the Act for registration, the Income-tax Officer can reject the same if he comes to the conclusion that the partnership is not genuine or the instrument of partnership does not specify correctly the individual shares of the partners. But once be comes to the conclusion that the partnership is genuine and a valid one, he cannot refuse registration on the ground that one of the partners is a benamidar of anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affected the validity or genuineness of the partnership. So much is conceded by the learned Attorney-General. If so, we do not see why a different result should flow if instead of one member of the divided family two members thereof under some arrangement between the said members of the family took 10 annas share in the partnership. If the contention of the revenue was of no avail in the case of representation by a single member, it could not also have any validity in the case where two members represented the divided members of the family in the partnership. As the partnership deed was genuine, it must be held that the shares given to Guruswamy Naidu and Venkatasubba Naidu in the said partnership are correct in accordance with the terms of the partnership deed. " Counsel for the assessee called attention to the decision of the Bombay High Court in CIT v. Raghavji Anandji and Co. [1975] 100 ITR 246, which has been referred to also by the Tribunal. There, the Bombay High Court referred to the contention raised that there could not be a valid contract of partnership between one Purshottam in one capacity and the same person in another capacity and that this is a good ground on whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Division Bench, Chagla C.J. observing : 'On the question submitted to us the only thing we have to consider is whether there is anything in law which precludes a person signing a partnership deed in two different capacities. Jagatchandra bad a seven annas share as representing the joint family. He was also the executor and represented the estate of his father and, under the will, as I have stated above, his minor son, Bhupendra, was entitled to seven annas share of his grandfather ; so Jagatchandra signed the partnership deed also as the executor and as representing the estate of his father. It is difficult to understand why one individual cannot execute the partnership deed in two capacities. Indeed, the Advocate-General has not seriously attempted to support this contention of the department .......' Mr. Hajarnavis urged that the two capacities under consideration before the said Division Bench were different from the two capacities of Vandravan Purshottam under consideration before us. It is to be remembered, however, that in law an estate vests in the executor and, therefore, the alleged distinction sought to be made by Mr. Hajarnavis is not one that commends itself. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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