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TMI Blog1971 (5) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1966-67. For the assessment year 1967-68, a declaration in Form XII was filed by the petitioner-firm. It was a declaration made under section 184(7) affirming that the firm had been granted registration and that there had been no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted. Ram Mohan, one of the minors admitted to the benefits of partnership, had attained majority on June 24, 1966, during the previous year, relevant to the assessment year 1967-68, and the declaration in Form XII was signed by him also. Admittedly, on Ram Mohan attaining majority, no fresh partnership deed was executed. It is stated that he did not elect not to become a partner in the firm and that there was no change in the shares of the partners in the profits or loses of the business. On July 29, 1968, the Income-tax Officer assessed the petitioner-firm as an unregistered firm holding that the constitution of the firm had suffered a change in view of Ram Mohan attaining majority and a fresh partnership deed should have been executed. The petitioner-firm appealed to the Appellate Assistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between such persons, who, as section 4 indicates, are called individually "partners" and collectively a " firm ". A firm consists of the partners related to each other in contract and the constitution of a firm is determined by the number and identity of the partners. There is a change in the constitution of the firm when there is a change in the number and identity of the partners. Generally, such a change takes place when a person is introduced as a partner into an already existing firm or a partner retires or is expelled or ceases to be a partner on his becoming insolvent or dies, provided that the partners are agreed to the admission of a new partner or the contract of partnership stipulates that the firm will not dissolve on one of the partners ceasing to be so by reason of any of the events mentioned above. A change in the constitution of the firm must be distinguished from the dissolution of the firm. The former assumes that the firm continues in existence, and that there is merely a change in the personnel of the firm. The latter contemplates the end of the contractual relationship between all the partners. The question is whether there is a change in the constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has elected not to become a partner. On behalf of the petitioner-firm, reference is made to section 63, and it is pointed out that a case of a minor becoming a partner on attaining majority has not been treated as involving a change in the constitution of the firm, there being two separate provisions in section 63 for the two classes of cases. Section 63(1) deals with cases of incoming and outgoing partners, contemplated in sections 31 to 34, while section 63(2) refers to cases falling under section 30. It will be noticed that section 31, which deals with the introduction of a person as a partner in the firm only with the consent of all the existing partners, is subject to the provisions of section 30. In other words, the prohibition imposed by section 31 will not apply to the case of a minor who on attaining majority elects under section 30 of the Act to be a partner of the firm. The requisite conditions of section 30(5) being fulfilled, he becomes a new partner in the firm. It is said that because of clause (2) of the partnership deed no fresh partnership deed was necessary when Ram Mohan attained majority, and the partnership deed sufficiently evidenced a firm in which Ram Moha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de on behalf of the petitioner-firm to section 187(2). And as regards Form No. XII, even though it was signed by Ram Mohan also, it could be of no avail. The declaration contained in it that there had been no change in the constitution of the firm is incorrect and being a firm contemplated by rule 24 of the Income-tax Rules, which in turn refers to section 184(7) of the Act, was not attracted at all. It is section 184(8) which applies, and the application for registration in accordance with rule 22(2)(ii) has to be made in Form No. XI-A. Rule 22(2)(ii) further requires that the application should be accompanied by the instrument evidencing the partnership as in existence from time to time during the previous years. As this stage, the contention on behalf of the petitioner-firm that a minor is a partner under the Income-tax Act, and, therefore Ram Mohan must be considered to have been a partner throughout can be disposed of shortly. There is no doubt that the expression " partner " has, by section 2(33) of the Income-tax Act, 1961, been defined to include a person who being a minor has been admitted to the benefits of partnership. But whether there was a change in the constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f that deed. Bhogi Lal Laherchand v. Commissioner of Income-tax, which was also referred to, is a case where a fresh partnership deed was executed when the minor attained majority and elected to become a partner of the firm. The question which arises before us did not arise there. We are unable to construe any of the observations made in that case as laying down that a minor is a partner of a firm during his minority. Nor do we find anything which sustains the case of the petitioner-firm in Tyresoles (India), Calcutta v. Commissioner of Income-tax, Dilipsinhji P. Desai v. Commissioner of Income-tax, Laxmi Trading Co. v. Commissioner of Income-tax, Rampatmal Tirkha Ram v. Commissioner of Income-tax and R. Sannappa and Sons v. Commissioner of Income-tax. In none of those cases did the question arise whether there was a change in the constitution of the firm when a minor, who was admitted to the benefits of partnership, attained majority and elected to become a partner of the firm. Some doubt has been expressed on the correctness of the decision in Ganesh Lal Laxmi Narain, to which one of us was a party. We think it unnecessary to express any opinion in the matter, although it would ..... X X X X Extracts X X X X X X X X Extracts X X X X
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