TMI Blog1973 (10) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership deed dated November 15, 1961, admitted the minors to the benefits of partnership and they were not full-fledged partners ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee-firm was entitled to registration under section 185 of the Income-tax Act, 1961 ? " The assessee-firm was constituted under a deed of partnership deed 15th November, 1961, with two major partners, viz., Dayal and Govardhan Das. Two minors,Uttam Kumar and Promod Kumar, were also alleged to be admitted to the benefits of this partnership. The Income-tax Officer held that according to the partnership deed the were not only admitted to the benefits of Partnership out were made full fledged partners and accordingly he came to the conclusion that the agreement was not registrable tender section 185 of the "Income-tax Act, 1961. The assessee went up in appeal, but the appeal was dismissed by the Appellate Assistant commissioner. The assessee then went up in appeal before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal holding that the partnership deed had created a valid partnership between the two major partners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hip property may be in danger..." The partnership deed was not signed by or on behalf of the minors. The Tribunal in its order emphasised the non-signing of the document by the minors in the following terms: " It is then significant to note that the partnership deed is not signed by the minors. " Learned counsel appearing for the parties also are agreed that the minors had not signed the partnership deed nor had anybody acting on their behalf. The minors were thus not parties to this document. In our opinion, the minors cannot be admitted to the benefits of partnership unless they are parties to the agreement through their guardians. Section 30(1) of the Indian Partnership Act says that a minor may not be a partnerin a firm, but, with the consent of all the partners for the time being, be may be admitted to the benefits of partnership. Sub-section (5) of the section provides that a minor, within six months of his attaining majority, give public notice that he has elected to become or not to become a partner. The proviso to this sub-section says that if he fails to give such notice, he shall become a partner on the expiry of the said six months. From the above provisions an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering sections 30(4) and 48 has observed that the minor's guardian has the power to accept the condition on which the benefits of partnership are conferred on the minor. The Supreme Court said : "It appears to us that the guardian can do all that is necessary to effectuate the conferment and receipt of the benefits of partnership." No case has been cited before us in which a partnership deed might have been held capable of being registered under the provisions of the Income-tax Act where the benefit, to be conferred on a minor had not been accepted through agreement by the guardian. If it were possible for a minor being admitted to the benefits of partnership by a unilateral act of the partners, a situation may arise where the partners may get the benefit under the Income-tax Act but refuse to give any benefits to the minor, as without the minor's guardian being a party to the agreement the minor will not be able to claim the profits of the partnership clue to lack of privity of contract. It cannot also be imagined that the money of the minor can be given to the partnership without the agreement about it in terms being settled and agreed between the minor's guardian and the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. In support of his contention he has placed reliance on the case of Shah Mohan Das. It is urged, that as the partnership deed which had come up for consideration before their Lordships of the Supreme Court contained in clause (8) the words : "The losses are agreed to be shared between the members in the like manner ", the finding of the court that the minors were not partners indicated that sharing of losses was possible even when the minors were to be admitted only to the benefits of partnership. In our opinion such an inference does not follow from this decision. The Supreme Court in its judgment had posed two questions : "(1) Does this deed then make the minors full partners or does it only confer benefits of partnership on them ? (2) Is any clause of the deed void? " The observation of the Supreme Court is in the following terms : "First it is clear from sub-section (2) of section 30 of the Partnership Act that a minor cannot be made liable for losses." The Supreme Court further observed : It follows from the above discussion that as long as a partnership deed does not make a minor full Partner, a partnership deed cannot be regarded as invalid on the ground th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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