COMMISSIONER OF INCOME TAX Vs. MATHURA PRASAD ANNOOLAL

JUDGEMENT

(1.) AT the instance of the CIT, U. P., Lucknow, the ITA Tribunal, Allahabad, has referred the following question of law under Section 256(1) of the I.T. Act, 1961, for the opinion of this court :

(2.) THE assessee was a partnership firm originally constituted under a deed of partnership dated 15th April, 1967. It consisted of three partners. Sheo Kumar Shah and Radhey Lal Shah, who were minors at the time of the execution of the deed of partnership, were admitted to the benefits of partnership. THE benefit of registration was continued thereafter under Section 184(7) up to the assessment year 1968-69. Radhey Lal Shah became major on 14th March, 1969. For the assessment year 1969-70, with which we are concerned in this reference application, a fresh application in Form No. XI-A was filed by the assessee-firm along with a new deed of partnership executed on June 12, 1969. THE ITO rejected the application for registration as, in his opinion, the fresh partnership deed should have been executed before 31st March, 1969, and since it was executed on Juno, 12, 1969, the firm was not entitled to registration. Against the aforesaid order of the ITO, an appeal was filed by the assessee-firm before the AAC of Income-tax, Bareilly. Disagreeing with the view taken by the ITO, the AAC of Income-tax held that since the old deed of partnership was in force up to six months of the minor attaining majority, therefore, the assessee-firm was not required to execute a fresh deed of partnership before 31st March, 1968. He held that the old deed continued to have legal force for six months. Accordingly, the AAC of Income-tax allowed the appeal and directed the ITO to treat the assessee-firm as a registered firm under Section 185 of the I.T. Act.

(3.) IT would thus be seen that a minor admitted to the benefits of the partnership is not a partner and that he is only entitled to the benefits of the partnership and may also be liable to losses but not personally. Under Sub-section (5) he has, however, to indicate his choice in the prescribed manner, whether he wants to continue as a partner or not. The legislature, however, has given a period of six months to him to take a decision whether he wants to continue as a partner or not. During this period of six months he continues to enjoy the same status in the firm which he had earlier before attaining the majority. Although Sub-section (5) has not clearly said so, yet it appears that by the legal fiction incorporated in this provision, a minor continues to be a minor and does not become a partner. The court has to assume all those facts and consequences which are incidental or inevitable corollaries to the giving effect of this fiction.