COMMISSIONER OF INCOME-TAX Vs. GOPAL RICE MILLS

JUDGEMENT

(1.) THIS is a reference under Section 66 (1) of the Indian Income-tax Act for the opinion or this Court on the following questions :

(2.) THE facts of the case are as follows : In the year 1928 the respondent, Gopal rice Mills, Kharsia, seems to have started business. In the record of the case we do not find who first constituted this firm. On 24th July, 1942 a deed of partnership was executed, which is Annexure A. In that deed of partnership four persons were shown as constituting the firm styled as "gopal Rice Mills, Kharsia". In describing the executants of this deed, four persons were named who were respectively described as owners of four firms. In the operative part of the deed, each firm was shown as having 25 Naya Paisa share, and it was stated that the proprietor of each of these constituent firms would supply equal capital for the new firm. The proprietors of each constituent firm were also shown as liable for losses and entitled to any profit that might be made by the Mills. In another portion of the deed it was stated that each "partner firm is entitled to receive profits". This deed was signed by all the four proprietors of the constituent firms, who described themselves as owners of these constituent firms. Registration of this deed was granted by the Income-tax Authorities; but in the year 1950, when the firms sought renewal of the registration, it was refused. On appeal to the Appellate Tribunal at Bombay, that decision was reversed and the income-tax Officer was directed to renew the registration. On the request of the department the Appellate Tribunal has referred the three questions above-mentioned for the opinion of this Court.

(3.) IN the application for renewal, which was made on 16th August, 1950, the names of the partners of the firm are shown. Three firms and one Narsingdas agarwal are shown to have one-fourth share. Under the name of each of the three constituent firms names of partners are mentioned, but the shares of those partners are not separately specified. At the bottom of the application one finds ten signatures representing the eleven names, and it is stated that one laxminarayan is a partner in two of the firms and has thus signed only once. From this it appears that the application for renewal was signed by all the persons named in the application and who constituted the membership of the constituent firms as well as the membership of the registering firm. The Income-tax Officer in rejecting the application for registration expressed the opinion that there can be no partnership for the purposes of the registration of the firm under Section 26-A of the Income-tax Act between an individual and three firms, as the case is here. He was also of the view that the particulars mentioned in the application did not comply with the requirements of the rules framed under the Act. He therefore declined to renew the registration and hence an appeal was taken to the Appellate tribunal at Bombay.