COMMISSIONER OF INCOME TAX Vs. SHIVLAL DAYARAM PANCHAL

JUDGEMENT

(1.) A very short question arises on this reference, namely, whether the assessee firm is entitled to registration under S. 26A of the IT Act, 1922. The reference relates to the asst. yrs. 1956 57 and 1957 58, the relevant account years being Samvat year 2011 (27th Oct., 1954, to 14th Nov., 1955), and Samvat year 2012 (15th Nov., 1955, to 2nd Nov., 1956). The assessee firm was originally constituted under a deed of partnership dt. 17th Jan., 1952, and so constituted it consisted of three sons and a mother as partners and the fourth son, namely, Nandubhai, who was then a minor aged about 17 years, was admitted to the benefits of the partnership. Nandubhai attained majority on 27th Sept., 1954, but he did not give within six months of attaining majority public notice whether he had elected to become or not to become a partner of the assessee firm with the result that he became a partner in the assessee firm on the expiry of the period of six months. Thereafter, on 3rd May, 1955, Balubhai, one of the partners of the assessee firm, died leaving him surviving his widow, Bai Jadi, and his two sons, Hemendra and Niranjan. Now cl. (6) of the partnership deed provided that on the death of a partner, his male heir or heirs should be taken as partners and the business should be continued to be carried on as before the death of the partner.

(2.) HEMENDRA and Niranjan being the male heirs of Balubhai were, therefore, entitled to be admitted in the assessee firm in the place of Balubhai as representing his share, but they were both minors and they were, therefore, admitted to the benefits of the partnership, their mother, Bai Jadi, acting as guardian in the matter of their admission to the benefits of the partnership. A new partnership deed was drawn up between the partners on 14th May, 1955, recording the aforesaid changes in the constitution of the partnership and the new partnership deed recited that on the death of Balubhai, his male heirs, Hemendra and Niranjan, had been admitted to the benefits of the partnership in conformity with cl. (6) of the earlier partnership deed and hence the new partnership deed was being entered into between the partners. The new partnership deed was signed by the major partners but not by the minors, Hemendra and Niranjan, or by Bai Jadi. Clause (2) of the new partnership deed set out the respective shares of the partners and of the minors admitted to the benefits of the partnership and the share of the minors was specified in the following terms :

(3.) THE assessees firm thereupon preferred appeals to the AAC, but the AAC also took the same view and dismissed the appeals. Then followed appeals to the Tribunal and before the Tribunal the assessee firm succeeded. The Tribunal took the view that prior to his death Balubhai held his share in the assessee firm as a Karta of his HUF and that when, on the death of Balubhai, Hemendra and Niranjan were admitted to the benefits of the partnership by reason of cl. (6) of the old deed of partnership, they also held their share as representing the HUF and since it was the HUF constituting a single unit which was a partner in the assessee firm through the two minors, it was not necessary to specify the individual shares of the two minors in the assessee firm and, consequently, there was no defect in the new partnership deed which precluded grant of registration on the basis of that partnership deed. The Tribunal, in this view of the matter, allowed the appeals of the assessee firm and directed grant of registration for the asst. year 1956 57 and renewal of registration for the asst. year 1957 58 on the basis of the new partnership deed. The CIT was obviously dissatisfied with this order and he accordingly applied for a reference and on the application the Tribunal referred for the opinion of the Court the question whether, on the facts and circumstances of the case, and having regard to the terms of the two partnership deeds, the claim of the assessee firm for registration could be refused on the ground that the individual shares of the minors were not specified in the new partnership deed.