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TMI Blog1975 (3) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, on the ground that in the absence of any specification of the individual shares of the partners the presumption under the Partnership Act, namely, that the partners shall have equal shares in the profit of the firm should apply in the case of minors and, therefore, those minors have equal share in their collective share and in that view of the matter he directed the Income-tax Officer to grant registration to the assessee-firm. In the appeal filed by the revenue, it has been held by the Tribunal that the individual shares of those minors are not specified and, therefore, the Tribunal allowed the appeal filed by the revenue and set aside the order of the Appellate Assistant Commissioner. In this connection we may note here that an appeal was also filed by the assessee, but we are not concerned with it in this reference. There is no dispute before us that, on a reasonable construction of the partnership deed as a whole in the light of the relevant facts and circumstances of the case, the minor sons of Hiralal were admitted to the benefits of the partnership as found by the Tribunal and, therefore, it is not necessary for us to give any reason in support of that f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows : 1. Kanailal Chhajer ... 1/10 share 2. Budh Singh Chhajer ... " 3. Nirmal Kumar Chhajer ... " 4. Rupchand Chhajer (minor) ... " 5. Gopi Chand Chhajer (minor) ... " 6. Dip Chand Chhajer ... " 7. Abhoy Kumar Chhajer, Jhumarmull Chhajer, Nanda Kumar Chhajer, Rekh Chand Chhajer, all minors represented by their mother guardian Smt. Basumati Chhajer ... " 8. Bahadur Singh Chhajer ... " 9. Duli Chand Chhajer (minor) ... " 10. Ratan Lal Chhajer (minor) ... " 5. No minor partners will share the loss in the business if any determined by proper accounting at the end of any accounting period during his period of minority but such loss due in the accounts of the minors will be shared proportionately by the major partners. 6. The firm will not be dissolved on the death of any partner but all the male heirs of the deceased will automatically step into his share so far as this partnership is concerned with all his assets and liabilities. " We do not find anything in this deed nor there is any material on the record to suggest that the minor sons of Hiralal should have equal shares in their collective share of profit of the firm. Further, the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. " Further, in the case of Bahu Rani v. Rajendra Baksh Singh, AIR 1933 PC 72, 75, Sir John Willis said that : " ...... the principle of joint tenancy is unknown to Hindu law except in the case of the joint property of an undivided Hindu family governed by the Mitakshara law which under that law passes by survivorship. " These two decisions of the Judicial Committee of the Privy Council were followed by Harries C. J. in Pulin Behari's case [1951] 20 ITR 314, 319, 320 (Cal). Therefore, the instant case before us falls under the exception. That apart, the rights of the minors are solely governed by the partnership deed, which is to be read in the light of the relevant facts and circumstances of the case and not by the Hindu law, for in the case of Rao Bahadur Ravulu Subba Rao v. Commissioner of Income-tax [1956] 30 ITR 163, 172 (SC) the Supreme Court says this : " Registration confers on the partners a benefit to which they would not have been entitled but for section 26A, and such a right being a creature of the statute, can be claimed only in accordance with the statute which confers it, and a person who seeks relief under section 26A must bring himself strictly within its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the " yarn shop " were specified in the partnership deed of the new firm for the purpose of registration under section 26A of the Act, and on that aspect of the matter the Supreme Court, at page 223 of the report, said as follows : " Merely because the deed of partnership set out in paragraph 8 the collective share of the yarn shop, registration could not be refused, for in the preamble the division of the shares of profits and losses among the three members of the yarn shop and those admitted to the benefits of the partnership is clearly indicated. " There was a clear finding of the Supreme Court that in the deed of partnership of the new firm the shares of the partners and the minors admitted to the benefits of the partnership of the firm, " the yarn shop ", were " clearly indicated " and hence this decision does not support the contention of Dr. Pal. On the other hand, in our opinion, it goes directly against his contention for the Supreme Court, at page 222 of the report, says this : " Registration of the firm may be obtained on an application to the Income-tax Officer on behalf of any firm, if the firm be lawfully constituted under an instrument of partnership whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " There was a definite finding of the Supreme Court that the individual shares of the partners were specified in the partnership deed of March 19, 1950, and hence the assessee was entitled to be registered under section 26A of the Act. The facts of those two cases including the language used in those partnership deeds before the Supreme Court are at poles apart from the facts and the language used in the partnership deed of the instant reference before us and, therefore, in our opinion, those decisions do not lend any assistance to the submissions of Dr. Pal. In the case, Commissioner of Income-tax v. Kishore Chand Ramji Dass [1962] 44 ITR 622 (Punj), several minors were admitted to the benefits of the reconstituted firm and they were given 1/10th share collectively in the profits of the reconstituted firm and it was held by the High Court of Punjab that those minors had equal shares in their collective share and, therefore, the reconstituted firm was entitled to be registered under the Act. This decision was followed by the same court in the case of Kishore Chand Ramji Dass v. Commissioner of Income-tax [1970] 77 ITR 76 (Punj) in which the assessee was the same firm. In the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on behalf of the assessee was that the two minors were admitted to the benefits of the partnership as male heirs of Balubhai by virtue of clause (6) of the earlier deed of partnership and that since, as male heirs, their shares in the estate of Balubhai would be equal, they must be deemed to take their collective share in equal proportion. This contention is in our opinion not well-founded and must be rejected. It is no doubt true that the two minors were admitted to the benefits of the partnership because they were the male heirs of Balubhai, but the 1/5th share which was given to them was given to them collectively and the firm was not concerned as to how they chose to apportion that 1/5th share between themselves. The fact that they were the male heirs of Balubhai was material only in that it entitled them to be admitted to the benefits of the partnership but that did not mean that the 1/5th share which was allotted to them collectively was taken by them necessarily in equal shares ; how they would divide the 1/5th share would be a matter of internal arrangement between them. The portion of the partnership deed relied on on behalf of the assessee cannot, therefore, avail t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26A of the Act, because the share of the minors who were admitted to the benefits of the partnership were shown collectively as one unit in the partnership deed, and, hence, their individual shares were not specified in the deed. Individual shares of the partners in the losses of the firm were not shown in the instrument of partnership in the case of United Hardwares v. Commissioner of Income-tax [1974] 96 ITR 348 (Ker) and it was held that the firm was not entitled to be registered by their Lordships of the Kerala High Court after taking into consideration all the decisions mentioned earlier. The partnership deed did not specify the individual shares of the partners through inadvertence and after the close of the year of accounting a deed of rectification was executed by the partners specifying their individual shares in the case of N. T. Patel Co. v. Commissioner of Income-tax [1961] 42 ITR 224 (SC). The application for registration of the firm under section 26A of the Act was refused and such refusal was confirmed by the Supreme Court, at page 228 of the report, in the following terms : " Registration under section 26A of the Act confers a benefit on the partners which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income-tax [1963] 48 ITR 922 (Cal) and the High Courts of Gujarat and Andhra Pradesh in the cases already stated and, hence, we overrule the contention of Dr. Pal. Further, it cannot be said that, in law, the minors shall have equal shares where they are given a collective share " without more ", for, the Supreme Court has expressly said so in the case of Kylasa Sarabhaiah v. Commissioner of Income-tax [1965] 56 ITR 219 (SC), at page 222 of the report, already quoted. No doubt the partnership deed should be reasonably read as a whole in the light of the facts and circumstances of the case, but undoubtedly the provisions of section 26A of the Act must be strictly observed by the assessee-firm. It is one of the most essential requirements of section 26A of the Act that " the individual shares of the partners " must be specified in the " instrument of partnership " and this requirement has not been abrogated by the Supreme Court in those two cases cited by Dr. Pal. Section 2(6B) of the Act provides that " the expression 'partner' includes any person who being a minor has been admitted to the benefits of partnership " and, therefore, the individual share of the minors admi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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