COMMISSIONER OF INCOME TAX Vs. HARI OM CO

JUDGEMENT

(1.) AT the instance of the Commissioner of Income-tax, the Tribunal has referred the following question for the opinion of this court:

(2.) THE assessee-firm applied for registration under Section 26A, Indian Income-tax Act, 1922, on the strength of a deed of partnership dated July 2, 1954. THE deed of partnership indicated that 18 persons were entering into partnership. THE Income-tax Officer found that some of these persons were partners in their individual capacity and certain others had entered into partnership as representatives of their Hindu undivided families and one party, Trijugi Narain, was a partner in a firm, M/s. Kalka Prasad Bhagwati Prasad. According to the Income-tax Officer, Trijugi Narain became a partner in the assessee-firm because of the investments made by the firm, M/s. Kalka Prasad Bhagwati Prasad. In the result, he came to the conclusion that the partnership was really between the members of various joint Hindu families and the partnership firm of Kalka Prasad Bhagwati Prasad and certain individuals. THE total number of partners thus exceeded 20 persons and as such the constitution of the firm was illegal, being contrary to Section 4 of the Indian Companies Act. In the result, he refused registration of the assessee-firm under Section 26A of the Income-tax Act.

(3.) IN the case of Agarwal and Co. v. Commissioner of INcome-tax, 1970 77 ITR 10. the Supreme Court has held that for the purpose of finding out who are the partners of a firm, one has only to look to the partnership deed and not to go behind it. If the partnership deed shows that the partners have entered into partnership in their individual capacity and there is nothing to indicate that they have done so as kartas of their respective joint Hindu families it is not open to the INcome-tax Officer to go behind the deed and find out, for the purpose of registration under Section 26A of the INdian INcome-tax Act, 1922, whether the partners have joined the partnership in their own right or as representing their families, and to refuse registration on the ground that the total number of the partners and the adult coparceners of the joint families would exceed 20.