COMMISSIONER OF INCOME-TAX, PUNJAB, PEPSU, HIMACHAL PRADESH AND JAMMU & KASHMIR Vs. DISTT FEROZEPUR REGISTERED (IRON AND STEEL) STOCK-HOLDERS ASSOCIATION

JUDGEMENT

(1.) On the 7th of April, 1952 a deed of partnership was entered into between nine persons who described themselves as belonging to different firms for the purposes of carrying on the business of dealing in iron and steel in the Ferozepore District under the name and style of the District Ferozepore Registered (Iron and Steel) Stock-holders' Association, Moga. Every partner was to invest a sum of Rs. 10,000/- as his share of capital with the firm. The deed was signed by all the partners in their individual capacity. For the assessment year 1953-54 registration was sought under Section 26-A of the Income-tax Act in respect of the aforesaid partnership firm. The Income-tax Officer rejected the claim for registration inter alia on the ground that as some of the partners of the assessee firm were representatives of smaller partnerships and that the deed of partnership and the application for renewal of registration should have been signed by all thede facto partners, including the partners of the smaller partnerships and not by the representative partner alone. He further held that the application for renewal of registration had not been actually signed by some of the partners shown in the deed of partnership, but their signatures had been forged by certain other persons. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer principally on the ground that the application for renewal of registration had not been signed by some of the partners themselves but their signatures had been forged by some other persons. On further appeal the Income-tax Appellate Tribunal held that in view of the affidavits of the partners concerned to the effect that they had actually signed the application for registration, their statements had to be accepted in the absence of any material to the contrary. In other words it was found that the deed of partnership had been duly signed by all the partners. The Tribunal also held that the conclusion drawn by the departmental officials that the division of profits was not between the contracting parties but between contracting parties and some strangers was not correct. The decision of the Tribunal was that the profits had actually been received by the partners who were parties to the deed of partnership. An application was made to the Tribunal to refer certain questions of law stated to raise out of the order of the Tribunal. This application was dismissed and it was made quite clear in the order that the Tribunal had found that all the parties had joined the partnership in their individual capacities and not as representatives of any other person or firm. According to the Tribunal these were questions of fact in respect of which no reference could be made. Later on the assessee moved this Court and obtained a mandamus directing the following questions to be referred.

(2.) So far as the first question is concerned, it may be mentioned that in the order of the Tribunal allowing the appeal by which the Income-tax Officer was directed to grant renewal of registration in terms of Section 26-A no such finding was given in clear words that the signatories to the deed of partnership had entered into it in their individual capacity and not as representatives of their firms, but it is implicit in the order that that was the conclusion of the Tribunal. However, the matter was clarified in the order dated 9th of September, 1955 and there could be no doubt that according to the Tribunal all such persons had joined the partnership in their individual capacity.

(3.) It is contended by Mr. D.N. Awasthy on behalf of the Commissioner of Income-tax that it was apparent from the deed of partnership that all the nine persons mentioned therein had entered into a partnership on behalf of their firms or that at least some of them had so entered in their representative capacity. The material terms of the deed of partnership have already been referred to and it is not possible to see how from the deed itself it is possible to conclude that all the nine persons, who are mentioned in their individual capacity but whose description is given as that of belonging to certain firms, had entered into partnership as representatives of the firms, for instance the first party is "L. Brahm Dutt son of L. Rikhi Ram of Messrs Rikhi Ram-Mohan Lal Moga of the first part." It does not necessarily follow from this that he was entering into the partnership on behalf of the firm Messrs Rikhi Ram-Mohan Lal. All that was meant was that he belonged to that particular firm. If it was intended that the firm should be the partner; then normally the whole sequence would have been altered and it would have been something like this "Messrs Rikhi Ram-Mohan Lal, Moga, of the first part, through L. Brahm Dutt son of L. Rikhi Ram." It is not possible, therefore, to say that from the deed of partnership it is apparent that the parties entered into it in their representative capacities.