COMMISSIONER OF INCOME TAX Vs. RUPCHAND ROUTHMALL

JUDGEMENT

(1.) THE assessee firm applied for registration under s. 26A of the IT Act on the basis of an instrument of partnership dated 21st July, 1950. THE parties to the agreement were Tolaram Dugar and his three sons, Hanumanmall, Naurathmall and Surajmall, the last one being a minor represented by his mother and natural guardian, Monohari Devi, and Routhmall Dugar and his sons, Keshrichand, Motilal and Chhatarsingh, the last one being a minor represented by his mother and natural guardian, Bhawani Debi. In the agreement it is stated that Tolaram and his sons, Hanumanmall, Naurathmmall and Surajmall, constituted a HUF and Routhmall and his sons, Keshrichand, Motilal and Chhatarsingh, constituted another HUF and that these tow HUF were carrying on business in partnership under an agreement dated 24th Nov., 1937, under the name and style of Rupchand Routhmall. It is further stated in the July, 1950, agreement that the two HUF were partitioned and there was an agreement of of partition on 30th March, 1950. It was stated in the agreement of July, 1950, that for the benefit of the minors it was agreed that they should remain joint with their respective fathers and that Tolaram and Routhmall, who were the Kartas of the two HUF, agreed to admit their respective sons, Hanumanmall, Naurathmall, Keshrichand and Motilal, as partners in the business carried on under the name and style of Rupchand Routhmall. THE share of Tolaram jointly with his minor son, Surajmall Dugar, was put down as four annas and similarly, Routhmall jointly with his minor son was entitled to a four annas share. THE remaining parties were each allotted two annas share. Though the partnership deed was executed in July, 1950, retrospective effect was given from March, 1950. THE IT authorities rejected the application on the grounds, firstly, that the shares of Tolaram and Routhmall were collectively shown as four annas each though they were shown as distinct partners and thus the shares of the individual partners were not specified and, secondly, that profits and losses had to be shared by all the partners in accordance with their shares with the result that the minors were made liable for the losses as partners and minors could not enter into such partnership agreements.

(2.) THE assessee firm preferred an appeal and contended that Tolaram and Routhmall were two HUF, each family consisting of a father and minor son and a share of four annas was allotted to each of such undivided families and, therefore, the shares were not unspecified. THE Tribunal held that Tolaram and Routhmall who admitted the adult sons as partners were Kartas of the erstwhile HUF as well as of the truncated HUF and that the minors were not partners and, therefore, the firm was entitled to registration. On these facts the following question of law has been referred :

(3.) COUNSEL on behalf of the assessee contended that since it was stated in the deed of partition dated 30th March, 1950, that the father and minor son were to continue to remain joint there was a partial partition and there was a truncated joint family out of the erstwhile joint family . It was also contended that the partnership agreement of July, 1950, was not signed either by the minor or anyone on his behalf and the minor was not admitted to the benefits of partnership, for the deed of partnership was not an agreement to that effect, and, finally, the recital that Tolaram and Routhmall agreed to admit 2nd, 3rd, 6th and 7th parties as partners had the result that the minor was not a partner and the fathers, Tolaram and Routhmall, were partners in their capacity as Karta of their respective families consisting of them and their respective minor sons.