TMI Blog1962 (10) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... the theatre Kasturba Talkies was entered into between C.J. Dubash, the assessee before us, acting for himself and as father and natural guardian of the minor daughter, Gulu, on the one hand, and P.R. Irani and S.P. Irani, on the other, on certain terms and conditions, as mentioned in the deed of 27th March, 1957, annexed to the statement of the case as annexure B . An application for renewal of registration under section 26A was made. It was signed by the assessee for himself and for Gulu. In the relevant assessment year, 1958-59, with which we are here concerned, the Income-tax Officer rejected this application for renewal of registration on the ground that this new firm had not been granted registration at any time before and as such the question of granting renewal does not arise. The assessment of the firm was made under section 23(3) read with section 23(5)(b), and the total income of the firm was allocated amongst the partners as shown in annexure F . It appears that no appeal has been filed against the assessment order of the firm determining the amount of total income or its allocation amongst the partners under section 23(5)(b). The assessment order which is annexure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness. On an application made by the assessee under section 66(1), the Tribunal has stated the case, raising the following two questions: 1. Whether, on the facts and in the circumstances of the case, the appeal of the assessee was barred under the second proviso to section 30(1) of the Act? and 2. Whether the income falling to the share of the assessee's minor daughter, Gulu, could be included in the assessee's assessable income under section 16(3)(a)(ii) of the Act? Mr. Kolah, appearing for the assessee, has contended before us that on a proper construction of the deed of date 27th March, 1957, it would be noticed that Gulu, who is a minor, has been made a full-fledged partner along with the other partners, and has not been admitted to the benefits of partnership; the deed of partnership has been signed on her behalf, and no provision for sharing losses is also made in the deed of 27th March, 1957. No partnership, as such, therefore, is constituted under the said deed. Reliance is placed by Mr. Kolah in support of his contention on the decisions reported in Commissioner of Income-tax v. Dwarkadas Khetan Co. [1961] 41 I.T.R. 528; [1961] 2 S.C.R. 821; Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial for the purposes of this case.] (b) in the case of an unregistered firm, the Income-tax Officer may, instead of determining the sum payable by the firm itself, proceed to assess the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, and determine the tax payable by each partner on the basis of such assessment, if, in the Income- tax Officer's opinion, the aggregate amount of the tax including super-tax, if any, payable by the partners under such procedure would be greater than the aggregate amount which would be payable by the firm and the partners individually, if separately assessed; and where the procedure specified in this clause is applied to any unregistered firm, the provisos to clause (a) of this sub-section shall apply thereto as they apply in the case of a registered firm. The scheme, in short, appears to be that the total income of the partnership firm which is an assessable unit under section 3 of the Act is first determined either under sub-section (1) or sub-section (3) or sub-section (4) of section 23. There is no option to the Income-tax Officer in the case of a registered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of section 23(5)(a). The partners of the unregistered firm are also individually assessable on their share in the total income of the firm when the Income-tax Officer treats the unregistered firm as a registered firm under clause (b) of sub- section (5) of section 23. In the instant case, the Income-tax Officer has refused the renewal of registration, but has treated the firm as a registered firm under clause (b) of sub-section (5). Now, the appeal that is contemplated under the second proviso to section 30(1) is against the determination of the amount of total income or loss of the firm and apportionment thereof between the several partners. Admittedly, the assessee who has been treated as a partner of this firm has not appealed under the second proviso, though he had a right of appeal either against the determination of the total income of the firm, or apportionment of that income amongst the partners. That being the position, even if it is assumed that there was no validly constituted firm under the aforesaid deed of 27th March, 1957, the assessee would be precluded from contending that no firm was constituted under the deed of 27th March, 1957. The assessee would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee as the approximate share of Gulu subject to rectification. These being the contentions raised by the assessee, in our opinion, it is necessary to examine as to whether the said amount of ₹ 11,000 could be included in the assessee's total income under section 16(3)(a)(ii). In our view, it was necessary for the Tribunal to go into the question even though it has held that the failure on the part of the assessee to file an appeal under the second proviso to sub-section (1) of section 30 precluded the assessee from contending that there was no firm validly constituted under the said instrument of 27th March, 1957. Section 16(3)(a)(ii) is in the following terms: 16. (3) In computing the total income of any individual for the purpose of assessment, there shall be included-- (a) so much of the income of a wife or minor child of such individual as arises directly or indirectly--.... (ii) from the admission of the minor to the benefits of partnership in a firm of which such individual is a partner. It would be noticed that to enable the Income-tax Officer to include the income of a minor child in the income of an individual, it must first be established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal to make a supplemental statement of the case. In our opinion, we will have to proceed with the reference on the aforesaid agreed statement of the case, and we would not be justified in asking for a supplemental statement of the case, because the facts stated in the statement of the case agreed to by the parties are now challenged before us at the stage of the argument of the reference. The question, therefore, whether Gulu has been admitted to the benefits of the partnership or not, or whether she has been made a partner along with other partners, is a matter purely of the construction of the deed of date 27th March, 1957. We do not, therefore, consider it necessary to call for a supplemental statement of the case. Before we proceed to examine the deed, it would be convenient to see whether any finding has been recorded by the Income-tax Officer or the Appellate Assistant Commissioner, that Gulu had been admitted to the benefits of partnership. The assessment order of the assessee has been placed on record. In that order, the Income-tax Officer observed: He has become a partner in the firm of Kasturba Talkies, Malad, during the year under review in place of his w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; have the same meaning respectively as in the Indian Partnership Act, 1932 (9 of 1932), provided that the expression 'partner' includes any person who being a minor has been admitted to the benefits of partnership. It is the argument of Mr. Joshi that according to this definition, partner includes a minor who has been admitted to the benefits of partnership, and it is in the light of this definition that we must understand the word partner in the order of the Income-tax Officer. Now, it is true that the definition contained in the interpretation clause of the Act is taken as guide in understanding those words used in the Act itself. But it would be difficult to interpret the orders of an officer with the aid of the interpretation clause of the Act. Turning to the order of the Appellate Assistant Commissioner, we have already reproduced paragraph 8 of the statement of the case, which states the ground on which the Appellate Assistant Commissioner has rejected the assessee's appeal. It does not appear that the Appellate Assistant Commissioner has recorded any finding that Gulu had been admitted to the benefits of partnership. This brings us to the deed. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing three annas and the said Soli taking the remaining four annas share. This deed has been signed by the assessee for himself and also for Gulu in his capacity as father and natural guardian of his daughter, Gulu, a minor. The deed also is signed by P.R. Irani and S.P. Irani. In view of the circumstances that the deed nowhere says that Gulu has been admitted only to the benefits of partnership, the assessee acting both on his own behalf and on behalf of his minor daughter, showing both of them as parties to the instrument, as signing the instrument on behalf of both as other partners have, the distribution of profits to Gulu as to any other partner, and absence of any saving clause in respect of the liability of Gulu for loss, in our opinion, it is not possible, on a true construction of the instrument, to hold that Gulu has been admitted only to the benefits of partnership and has not been admitted as a partner. Thus, Gulu not having been admitted to the benefits of partnership, it is difficult to uphold the orders of the income-tax authorities and of the Tribunal including her share income in the income of the assessee under section 16(3)(a)(ii) of the Act. Mr. Joshi has re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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