TMI Blog1967 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. There were two parties to the deed, the first party being Lala Suraj Bhan of Delhi representing the joint Hindu family of Dina Nath Nanak Chand, and Lala Debi Pershad, Lala Jwala Pershad, Lala Sheo Pershad, Lala Ganpat Pershad Lala Maidhan, Lala Mai Diyal and Lala Matu Ram collectively referred to as the second party. There was a partial partition on August 21, 1947, among the members of Dina Nath Nanak Chand and the joint family status was severed. By deed dated September 8, 1943, the eight annas share which was allotted to Lala Suraj Bhan in the assessee-firm was divided between the four members of the family : four annas going to Lala Suraj Bhan and the remaining four annas to three other members. By a subsequent deed dated March 18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be granted. The Tribunal referred under section 66(1) of the Income-tax Act, 1922, the following question to the High Court of Judicature at Allahabad : " Whether, on the facts and in the circumstances of the case, the order cancelling renewal of registration was proper and justified ?" The High Court answered the question in the affirmative. They observed that after severance of the joint family status among the members of Dina Nath Nanak Chand, the partnership deed dated August 21, 1939, ceased to represent truly the constitution of the firm, and that since all the members of the Hindu undivided family were partners under the instrument of partnership and not merely the karta, the application for renewal not signed by all the member ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erance of the joint family status the partnership agreement became ineffective. The Tribunal was of the view that the partnership deed and the application of renewal of registration had to be signed by all the members of Dina Nath Nanak Chand and that as they were not so signed the Income-tax Officer had no power to grant renewal. The High Court agreed with the Tribunal and did not express any opinion on the view expressed by the Commissioner. Counsel for the assessee-firm submits that the High Court misinterpreted the deed of partnership. He says that the agreement of partnership was made between Lala Suraj Bhan on the one hand and the second party on the other, and that the recital that Lala Suraj Bhan represented the joint Hindu family ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presenting the family entered into an agreement of partnership with other persons, it cannot be inferred that an agreement of partnership was intended contrary to law between a Hindu undivided family consisting of all adult members, females, minors and even unborn persons and strangers to the family. A partnership under section 4 of the Indian Partnership Act is " the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all." Under an agreement of partnership there must arise the relation of principal and agent inter se between the members of the partnership for the purpose of carrying on the business. The intention disclosed by the deed was that Lala Suraj Bhan was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an this clause does not indicate that the members of the joint family, of which Lala Suraj Bhan was the manager, become on that account partners. In clause 7 it was stated, inter alia : " It is declared that though the members of the second party have got their shares inter se defined the members of the second party shall be treated as one group and would be jointly entitled to the rights and be responsible for the liabilities as a partner to the first party. Likewise the members of the first party would be jointly entitled to the rights and be responsible for the liabilities as a partner to the second party. The first part of the clause does not indicate that the members of the joint family, Dina Nath Nanak Chand, were entitled to enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement. Thereby he was not seeking to make the members of the joint family, Dina Nath Nanak Chand, partners of the assessee-firm. The deed has not been carefully drawn up, and somewhat inconsistent recitals have been made. But taking an overall view of the diverse covenants, we hold that the partnership agreement was between Lala Suraj Bhan on the one hand, and the named persons on the other, and the fact that Lala Suraj Bhan was originally the karta of the joint family, Dina Nath Nanak Chand, and that joint family had later ceased to exist by reason of partition will not affect the validity of the partnership or its continuance. Lala Suraj Bhan being the contracting party, the application for registration could not be rejected because t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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