BRIJLAL MADANLAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee, M/s Brijlal Madanlal, is a firm which originally consisted of three partners, namely, Mandanlal Paliram, Kishorilal Fatehchand and Anardevi, widow of Brijlal Paliram. With effect from 1st November, 1959, Anardevi retired from the firm and Madanlal and Kishorilal continued to be the continuing partners of the firm. By an instrument of partnership dt. 6th April, 1960, the continuing partners are said to have admitted one Mrs. Chandrakaladevi Deviprasad, wife of Deviprasad Brijlal, in the partnership w.e.f. 1st November, 1959. An application for registration of the firm was made on 1st April, 1960, and a copy of the instrument of partnership was filed.

(2.) WITH a view to verify the genuineness of the new firm, the ITO wanted to examine the new partner, Chandrakaladevi, and he, therefore, issued a summons under S. 131 of the IT Act, 1961. She did not appear before the ITO on 2nd March, 1966, on which day she was summoned to appear. A letter, however, came to be written by someone on her behalf that she had gone to her native place in Rajasthan. An intimation was, therefore, sent to the firm about the absence of Chandrakaladevi and the two other partners were asked to produce Chandrakaladevi on 14th March, 1966. On that day also Chandrakaladevi did not appear and she was again stated to be out of Bombay at Khamgaon. The assessee's representative made a statement in writing before the ITO that Chandrakaladevi was admitted to the firm only because of her bringing in a capital of Rs. 50,000 and she had not been taking any active interest in the administration and management. She was stated to be only a financing partner. The ITO found that there was no reference to the contribution of Rs. 50,000 by Chandrakaladevi in the instrument of partnership. He took the view that merely by giving or advancing an amount to the firm did not make that party a partner in the firm unless it is specifically so stated in the terms and conditions of the deed. The ITO, therefore, took the view that it was not proved that Chandrakaladevi was a partner and that the firm had really only two partners, which position, however, was not reflected in the instrument of partnership. He, therefore, declined to grant registration.

(3.) AT the instance of the assessee, the question which has now been referred to us is :