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TMI Blog1983 (5) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the assessee under section 185(1)(b) of the Income-tax Act, 1961 ('the Act') observing that since the date of birth of Navneet Rai was 1-7-1959, he was minor till 1-7-1977 and since there is a mention in the partnership deed executed on 15-7-1977 that the partnership shall be deemed to have commenced from 1-4-1977, as on 1-4-1977 Navneet Rai was minor, agreement is invalid ab initio and the firm was non est in law on 1-4-1977. The ITO held that the ratification of the oral agreement on 15-7-1977 by means of a written partnership deed does not lend legal and genuine garb to the firm and he, therefore, rejected the registration claim of the assessee. 3. When the assessee carried the matter before the AAC, he, reversing the action of the ITO, accepted the claim of the assessee in respect of registration in the following words : "6. I have considered the submissions of the learned counsel for the appellant and also gone through the assessment record. It appears that Shri Mohan Lal was carrying on business of kiryana and pansarat in partnership along with Shri Jagdish Rai uptill 31-3-1977. On that date, Shri Jagdish Rai retired from the partnership and Shri Mohan Lal decided to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the facts that on 15-7-1977 when the partnership deed was executed, Navneet Rai was a major, as he attained majority on 1-7-1977, his date of birth being 1-7-1959. The only clause which is considered cancerous to the assessee's claim of registration is clause 2 in the partnership deed, which reads as under : "2. That the partnership shall be deemed to have commenced with effect from 1-4-1977 and it shall be a partnership at will." Reliance of the AAC on the case of R. Dwarkadas Co. is rightly placed. The distinction made by the learned departmental representative that in that case there were more than two majors whereas in the instant case there was only one major to start with, cannot be damaging to the claim of the assessee because on 15-7-1977 both the partners, Mohan Lal and Navneet Rai, were majors. In the case of R. Dwarkadas Co., a partnership deed was executed between the three partners, one of whom was a minor on 21-8-1951. The minor was shown as a full-fledged partner and the partnership deed was signed on his behalf by power-of-attorney holder of his father. The abovesaid deed held the field for two years and the registration was refused for the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instrument of partnership, on the basis of which registration has been asked for, is the original deed of partnership and the subsequent document executed on 24th February, 1955, . . . " While dealing with the issue of registration for the assessment year 1955-56, their Lordships further observed as under, while accepting the claim of the assessee : ". . . For the partnership business, therefore, which was carried on and continued from and after 7th November, 1953, the three persons, who had agreed, were all three major and adult persons, who could competently agree to do so. For the assessment year 1955-56, therefore, which corresponded to the Samvat Year 2010 extending from November 7, 1953, to October 26, 1954, a partnership of three adult persons, who had agreed to carry on business, had continued to be in existence. The document constituting this partnership was the document of the old partnership with the addition of an endorsement thereon stating that it was continued on the same terms as contained in the original document. Now, in the partnership evidenced by the original document, one of the partners was a minor, but in the continued partnership there was no minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f R. Dwarkadas Co., with which we have dealt with above. To state, facts in the case of Dwarkadas Khetan Co. are quite different. The minor in that case was admitted as a full-fledged partner and he was also a signatory to the instrument, though his natural guardian had also signed it. He was to bear losses and profits and was to attend to the business and manage its affairs. He was given the right to vote and was entitled to inspection of books. On the basis of those facts, their Lordships of the Supreme Court held that the partnership deed in which the minor was admitted as a full partner was not valid and could not be registered. On the other hand, it was observed in the said case that 'Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it'. In the instant case, registration is claimed on the basis of partnership deed which is executed between the two majors. 9. Their Lordships of the Punjab High Court in the case of B. N. Dheer Sons had occasion to deal with an issue where recital of the previous oral partnership in the deed was a bar to the registration of the partnership as from the date of deed, and Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm, and it should be treated as constituted under the instrument as from the date of the instrument." [Emphasis supplied]. 10. The contention of the learned departmental representative that the Gujarat High Court decision in the case of Bharat Prakashan goes against the assessee, is incorrect. In that case, two brothers, one of whom was a minor, executed a deed of partnership signed by both of them on 25-7-1953. Second brother attained majority on 23-10-1953. On 25-1-1955, the firm applied for registration, relying on the partnership deed of 25-7-1953, which was signed by two partners, one being a major and the other being a minor. Their Lordships of the Gujarat High Court on these facts held that since at the date when the deed of partnership was executed, one of the brothers was minor, no firm came into existence under the deed of partnership. The firm which came into existence after 'B' attained majority was an oral contract. Since no deed was again executed when both the brothers became majors, the firm could not be considered as constituted under an instrument of partnership. This decision, though remotely, on the other hand, supports the case of the assessee, because here ..... X X X X Extracts X X X X X X X X Extracts X X X X
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