TMI Blog1961 (8) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) Kylasa Veeresalingam .... (b) Nagendra Rao } 090 2. K. Sathaiah .... 036 3. V. Narayana .... 036 Total 100 2. The application was signed by K. Veeresalingam, K. Nagendra Rao, K. Sathaiah and V. Narayana. The assessment year was 1955-56 and the accounting year for the relevant assessment year was from November 7, 1953, to October 26, 1954. The deed of partnership on which reliance was placed for the purpose of registration under the Indian Income Tax Act was dated December 12, 1953. The Income Tax Officer rejected the application. On appeal, the order of the Income Tax Officer was confirmed by the Appellate Assistant Commissioner which in its turn was confirmed by the Income Tax Appellate Tribunal, Hyderabad Bench. On an application filed by the assessee to the High Court, the Tribunal referred the above question for decision. The material portions of the deed of partnership dated December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) K. Veeresalingam 1/2 share (ii) K. Nagendra Rao 1/2 share constituted under an instrument of partnership dated February 20, 1952 } 090 2. Kolluri Sathaiah 036 3. Veeravalli Narayana 036 Total 100 1/32 (0-0-6 in a rupee) of the total profits shall be set apart for charity in the name of deity Bonthapalli Veerabhadra Swamy and the balance alone shall be divisible the partners in accordance with their representative shares as said above. 3. The instrument of partnership referred to in this deed is executed by Kylasa Veeresalingam and Kylasa Nagendra Rao. Under this deed, five minors are admitted to the benefits of the partnership evidenced by the deed of partnership dated February 20, 1952. It was also recorded in that deed of partnership dated February 20, 1952. It was also recorded in that deed that each of them was entitled to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court held that a firm is not an entity or person in law, but is merely an association of individuals and that a firm is only a collective name of those individuals, who constitute the firm and that a firm as such is not entitled to enter into a partnership with another firm or individuals. The Supreme Court, therefore, held that there can arise no question of registration of a partnership purporting to be one between three firms, a Hindu undivided family business and an individual as a firm under section 26A of the Act. 6. It can, therefore, be no longer contended that a partnership which purports to be one between two or more firms, or between one firm and another individual, or a Hindu undivided family can be registered under section 26A of the Indian Income Tax Act. In the present case, the deed of partnership, on its face, purports to be one between (I) Kylasa Sarabhaiah, a firm constituted under an instrument of partnership dated February 20, 1952, consisting of (a) Kylasa Veeresalingam; (b) Kylasa Nagendra Rao, with five minor brothers admitted to the benefits of the partnership, (2) Kolluri Sathaiah and (3) Veeravalli Narayana. In view of the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ichand Laxminarayan v. Commissioner of Income Tax and distinguished it. The learned Chief Justice pointed out that, in that case, on a true reading of the partnership deed, it is the constituent members of the two firms and not the two firms as entities that had entered into the partnership with the individual and that fact was amply borne out both by the recitals and the fact that the partnership deed had been signed by the constituent members of the two firms. The other provisions in the deed of partnership were also referred to as making the intention of the parties clear that the partnership deed in question was one between individual partners only who were the constituent members of the two firms and not the two firms as entities. With regard to the objection on behalf of the department based upon the fact that the partnership deed in question did not specify the individual shares of the several partners, the learned Chief Justice held that these individual shares could be ascertained by referring to their shares as specified in the respective deeds of partnership of the two firms and that such a course was permissible under section 26A of the Act. 10. But, on a reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners. Therefore, where a partnership consists of a firm and some individuals and the deed of partnership, while mentioning the proportion in which the profits and losses are to be shared between the firm and the other partners respectively, does not specify the shares of the partners of the firm which is a member of the partnership, the partnership cannot be registered as a firm under section 26A. The fact that the smaller partnership the shares of its partners are specified is immaterial. 12. This decision is binding on us. It, therefore, follows that, unless the deed of partnership dated December 12, 1953, specified the individual shares of its partners, it cannot be registered under section 26A of the Act. In our opinion, it is not permissible to look into the instrument of partnership dated February 20, 1952, by which Kylasa Sarabhaiah firm was constituting that firm in order to ascertain the individual shares of the members of this firm which is now sought to be registered. What all was decided by the High Court of Bombay in Chhotalal Devchand v. Commissioner of Income Tax was only that an instrument of partnership should be constituted by one or several documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which goes beyond this section cannot be regarded as valid for the purposes of registration under section 26A of the Indian Income Tax Act. Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. 14. It was also further held that : If the Income Tax authorities register the partnership as between the adults only contrary to the terms of the document, in substance, a new contract is made out. It is not open to the Income Tax authorities to register a document which is different from the one actually executed and asked to be registered. 15. In the deed of partnership in question in that case, as it is in the present case, it was not stated that the minors were only admitted to the benefits of the partnership and are not liable for the losses. It was for this reason that the Supreme Court held that the firm in that case could not be registered under the under the Indian Income Tax Act. Following this decision of the Supreme Court, we hold that the assessee firm in the present case before us also cannot be registered under section 26A of the Indian Income Tax Act. Following this decision of the Supreme Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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