VUMMITTI SUBRAMANIAM CHETTY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) ONE V. Subramaniam Chetty was carrying on business in yarn in his individual capacity from April, 1956. On March 31, 1961, a sum of Rs. 50,000 was transferred from his account to the account of his son, V. Pandurangan, in the accounts of the business. Later, on April 4, 1961, a deed of partnership came to be executed between himself and his son. At that stage, the son, Pandurangan was aged 19 years. An application was filed for registration of the said firm for the year ending with March 31, 1962. The Income-tax Officer, taking into account Clauses 9 and 10 of the partnership deed, held that there was no relationship of partners between the said Subramaniam Chetty and his son, Pandurangan, inasmuch as Panduragan derived his right and power only by consent of his father. In that view, the Income-tax Officer rejected the application for registration. There was an appeal to the Appellate Assistant Commissioner, who, however, held that the two conditions for bringing into effect a partnership, namely, (1) an agreement to share the profits as well as the losses of the business, and (2) each of the partners acting as agent of the other, had been duly fulfilled in this case and that the mere fact of the power to manage the business having been exclusively given to the father would not invalidate the partnership. In that view the Appellate Assistant Commissioner ordered the registration of the firm. The revenue appealed to the Tribunal. It was submitted before the Tribunal by the revenue that the entire control and management of the business was in the hands of the father, that, as such, the principle of agency was completely absent in this case, that the son who was the second partner had no power to bind the other partner and that, in view of the decisions of the Supreme Court in M. P. Davis v. Commissioner of Agricultural Income-tax, . and that of the Mysore High Court in Commissioner of Income-tax v. K. D. Kamath & Co., [1964] 54 I.T.R. 72 (Mys.)., the order directing the registration of the firm cannot be justified. At the instance of the assessee the following question has been referred to us for decision :

(2.) THE learned counsel for the assessee has taken us through the various clauses in the partnership deed in support of his submission that the partnership deed clearly brings into existence the relationship of the partners between Subramaniam Chetty, the father, and his son, Pandurangan. THE learned counsel also submits that the interpretation placed on Clauses 8, 9, 10 and 16 by the Income-tax Officer as well as by the Tribunal cannot be sustained in law, and the view of the Tribunal that Clauses 8 and 9 of the partnership deed clearly abrogate altogether the agency principle is not tenable at all in view of the decision of the Supreme Court in K. D. Kamath & Co. v. Commissioner of Income-tax, ..