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TMI Blog1978 (6) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessee, he directed the with drawal of the registration and re-registration ordered by the ITO and directed him to pass fresh orders of assessment as in the status of association of persons. Aggrieved by the orders of the CIT, the assessee filed two appeals before the Income-tax Appellate Tribunal, Bangalore Bench. The Tribunal allowed the appeals and restored the orders of registration and re-registration. At the instance of the CIT, the following questions of law have been referred to us as arising out of the two cases : " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, on a proper construction of the partnership deed dated 12th October, 1967, the minor, Shivashankar, was not made a full-fledged partner liable to share in the losses of the assessee firm and, hence, the assessee was entitled to the benefit of registration for the assessment year 1969-70 ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that, on a proper construction of the partnership deed dated 12th October, 1967, the minor, Shivashankar, was not made a full-fledged partner, liable to share in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The first party shall be managing partner who will be in-charge of the business and he can take up or appoint staff required for carrying on the business. He shall continue till he expresses his unwillingness or becomes unable to work due to incapacity. The remuneration of the managing partner is fixed at the rate of Rs. 250 per month and this pay shall continue till it is increased by all the partners unanimously. The managing partner shall have the following powers and duties..... 7. If any partner wants to retire from partnership during its subsistence he shall do so by giving a notice six months in advance (clear calendar months) and he shall be deemed to have retired on the last date of the month in which his notice has been received. Accounts should be taken as on that day and paid off as per the accounts. There shall not be any valuation for 'goodwill'. If all the partners retire at one or the other time except two and the last partner also wants to retire or by majority opinion if it is resolved to dissolve the partnership and if any one of the partner wants to continue the business of the firm he shall be allowed to do so without valuing the goodwill of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of securing benefits of the partnership for the minor having in view s. 30(1) of the Partnership Act, which provided that a person who was a minor according to law to which he was subjected might not be a partner in a firm, but, with the consent of all the partners for the time being, he might be admitted to the benefits of the partnership. It was of opinion that the deed should be construed accordingly. A question similar to the question arising in these two cases came up for consideration before the Supreme Court in CIT v. Dwarkadas Khetan Co. [1961] 41 ITR 528. In that case also, the facts were more or less similar except that the profits had to be shared unequally and that the partnership deed had been signed both by the minor and by his natural guardian. There was no recital in any part of the partnership deed indicating that the minor who was also a party to the document was being admitted to the benefits of the partnership and was not a full-fledged partner. The Supreme Court noticed that there was a distinct cleavage of opinion among the High Courts at that time. The Bombay, Madras and Patna High Courts had held that where a minor was admitted as a full par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull partner, the deed is to be regarded as valid, because, under the law, a minor can be admitted to the benefits of partnership. The rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration. The law requires all partners to sign the application, and if the definition were to be carried to the extreme, even a minor who is admitted to the benefits of partnership would be competent to sign such an application. The definition is designed to confer equal benefits upon the minor by treating him as a partner; but it does not render a minor a competent and full partner. For that purpose, the law of partnership must be considered, apart from the definition in the Income-tax Act. Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner, though with the consent of the adult partners he may be admitted to the benefits of partnership. Any document which goes beyond this section cannot be regarded as valid for the purpose of registration. Registration can only be granted of a document between persons who are parties to it and on the covenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation of sub-clause (9), the minor is not to bear any losses; the losses are to be borne by Nathmal Jethaji. Sub-clause (16) does not make the minor a working partner. The only persons who were entitled to be the working partners are Nathmal Jethaji, Phulchand Nathmal and Sakalchand Thikmaji. It is in the light of these clauses that the other clauses should be construed." Accordingly, the Supreme Court was of opinion that there was no fatal defect in the, partnership deed in question and the assessee was entitled to the registration prayed for. From the foregoing, it is clear that neither of these two cases is of any assistance to the assessee, as we do not find any recital in, the partnership deed in question indicating that the minor, Shivashankar, was only being admitted to the benefits of the partnership of the firm in question. It was, however, argued by Sri K. Srinivasan, that the argument that, in the absence of a recital that the minor should personally bear the losses, the firm would be entitled to the registration, had not been addressed or considered by the Supreme Court in the case of Dwarkadas Khetan Co. [1961] 41 ITR 528 (SC), and it was possible to take a v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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