DAWJEE DADABHOY AND CO Vs. S P JAIN

JUDGEMENT

(1.) These four matters have been heard together and the questions of fact and law are common. The facts are briefly as follows:--

(2.) The petitioner In all these applications Is a partnership firm duly constituted under the Indian Partnership Act. It Is stated that" the firm was established as early as 1894 and has continued all along, except for reconstitution of the personnel from time to-time, with the death or retirement of a partner and/or admission of a new partner or legal heir of a deceased partner. It appears also that the partnership deed was accordingly changed from time to time. A partnership deed was executed on or about November 14, 1949 and another on or about July 2, 1953. The latest partnership deed is dated 31st August 1954. In these applications we are concerned with the Income-tax Assessment years 1950/51, 1951/52, 1952/53 and 1953/54. For all these years, the firm has been assessed as a registered firm, that Is to say, registered under the Indian Income-tax Act. In other words, it was registered under Section 26A of the Indian Income-tax Act and assessed as a registered firm in accordance with Section 23 (3) read with Section 23 (5) (a) of the said Act, The registration of a firm is for the period of one year on each occasion, and the registration had been renewed from year to year until on or about September 30 1955 an order has been passed by which renewal of registration has been refused. The petitioner firm has filed an appeal under Section 30 of the said Act against the order refusing registration. This appeal is pending before the Appellate Assistant Commissioner of Income-tax Range '(C). Before I proceed further it will be necessary for me to advert to the law of registration of firms under the Indian Income-tax Act. Under the said Act, a firm can be assessed as a separate entity. In the normal course, therefore, a firm would be assessed on its total income. The Act. however, provides for registration of firms. This is done under Section 26A which runs as follows:--

(3.) Section 59 of the Act confers power upon the Central Board of Revenue to make rules for carrying out the purposes of the Act, and rules have been framed known as the Income-tax Rules 1922. Rule 2 of the said Rules lays down as to how application for registration should be made. Rule 3 lays down that the application should be made in a particular form and verified in the manner stated therein. It must be remembered that under Section 26A of the Act, registration can only be granted to a firm which is constituted under an instrument of partnership, that is to say, a written document, which document must specify the individual shares of the partners. That being one of the essential ingredients of registration, it is not surprising that in Rule 3 it has been laid down that the application in the prescribed form is to be accompanied by the original instrument of partnership. The form of an application for registration of a firm contains a clause whereby an applicant has to certify that the profits or losses, if any, of the previous year were, or will be, divided or credited as shown in the schedule, and that the information given in the schedule as also in the body of the application, were correct. In the schedule, particulars have to be given, including the names of the partners, and their respective shares, in the balance of profit or loss. Particulars have also to be given of the apportionment of the income, profits or gains or loss in the previous year between the partners who are entitled thereto, or liable therefore. Rule 4 states that if on receipt of the application the Income-tax Officer was satisfied that there is or was a firm in existence, constituted as shown in the instrument of partnership, and that the application had been properly made, he should register the firm and grant a certificate of registration. Sub-rule 2 states that if the Income-tax Officer was not so satisfied he should pass an order in writing refusing to recognise the instrument of partnership or the certified copy thereof. Under Rule 5, the certificate of registration has effect only for one year. Under Rule 6, any firm to whom a certificate of registration had been granted under Rule 4 may apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year. The form of such an application for renewal is also prescribed and is analogous to the form prescribed for an original application. Such an application also contains provision for furnishing particulars and also for a certificate that profits or losses of the previous year were or will be divided or credited according to the manner as shown in the application. Under Rule 6A, on receipt of such an application the Income-tax Officer may if he is satisfied that the application was in order and that there is or was a firm In existence constituted as shown in the instrument of partnership, grant to the assessee a certificate signed and dated by him in the form prescribed. If the Income-tax Officer was not so satisfied he is entitled to pass an order refusing to renew the registration. Rule 6B is important and is set our below: