GOVERNOR-GENERAL IN COUNCIL Vs. MULLA MOHOMMAD BHAI

JUDGEMENT

(1.) UNTIL 1932 Mulla Fida Ali, defendant 3, was admittedly the sole proprietor of a hardware business in Nagpur carried on under the name of Mulla Fida Ali Sultan Ali. In 1932 he purported to take his three eldest sons, the first three plaintiffs, into partnership and a deed of partnership was executed on 25th July 1932. Applications based on this deed of partnership and a subsequent deed of partnership dated 14th August 1939 were made to the income-tax authorities under Section 26A, Income-tax Act, to have the firm registered for the purposes of that Act. These applications were unsuccessful. A new deed of partnership between Mulla Fida Ali and his five sons, who are the plaintiffs in this suit, was executed on 14th August 1989 and registered with the Registrar of firms on 28th October 1939. An application to the Income-tax Officer during the assessment for 1939-40 to have the firm registered under Section 26A, Income-tax Act, was allowed on 20th March 1940. On 4th November 1940 there was an additional instrument of partnership. During the assessment for 1940-41 an application was made to the Income-tax Officer for renewal of the certificate of registration, but that was rejected on 11th February 1941 on the ground that there was no genuine partnership and that Mulla Fida Ali continued to be the sole owner of the business. An appeal against that order was preferred to the Appellate Assistant Commissioner, but that appeal has yet not been decided, apparently because the appellants before him wished the point to remain undecided until this suit had been decided.

(2.) ON 29th August 1941, the five sons of Mulla Pida Ali instituted the present suit against (1) Secretary to the Central Government Delhi, through the Deputy Commissioner, Nagpur, (2) the Income-tax Department, Nagpur, through Income-tax Officer, Nagpur, and (3) Mulla Pida Ali in which they claim the declarations--

(3.) THE trial Court, after framing certain preliminary issues, held that the Income-tax Officer's order dated 11th February 1941 refusing to renew the certificate of registration was intra vires and that the present suit was barred by Section 67, Income-tax Act. The learned District Judge, who remanded the case to the trial Court for proper disposal in accordance with law, stated that he had no doubt that the Income-tax Officer had full power to refuse to renew the certificate and that there was no room for complaint that the Income-tax Officer's order was without jurisdiction or illegal on that ground and that that disposed of the question of ultra vires. He then went on to say that the question to be decided was whether an order passed by an Income-tax Officer in the proper exercise of his powers could be challenged in a civil Court. We are not quite sure what exactly he decided on this point. He held that Section 67, Income-tax Act, did not bar the suit because the plain, tiffs were not seeking any relief in respect of the assessment but a declaration of status which would be binding on the Income-tax authorities. In the course of his coming to the conclusion that the suit was not barred by Section 67 he remarked that "if something is done illegally or a decision contrary to law is arrived at under special Act, normally the civil Courts have power to deal with the matter" and "under the ordinary law an illegal decision would be subject to reconsideration," though previously he had apparently held that the decision of the Income-tax Officer was neither illegal nor contrary to law. In Section 2 (6-B), Income-tax Act, a "firm" is defined as having the same meaning as in the Partnership Act; in Section 2(14) a "registered firm" means a firm registered under the provisions of Section 26A, and in Section 2(16) an "unregistered firm" means a firm which is not a registered firm. A firm is assessed differently according as whether it is a registered firm or an unregistered firm. Under Section 26A an application may be made to the Income-tax Officer on behalf of any firm constituted under an instrument of partnership specifying the individual shares of the partners for registration for the purposes of the Income-tax Act. If on receipt of such an application the Income-tax Officer is satisfied that there is a firm in existence constituted as shown in the instrument of partnership, then under E. 4 of the rules under Section 26A he shall certify that the instrument of partnership or certified copy produced before him has been registered. It will be noticed that it is the Income-tax Officer who must be satisfied that there is such a firm in existence. The certificate of registration has effect for one year only. Under Rule 6 the firm may apply to the Income-tax Officer for renewal of a certificate of registration, and under Rule 6A or 6B the Income-tax Officer may renew or cancel the certificate.