9911796707
TMI Blog1996 (12) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... by name Padmapriya, the deed made no distinction between her and other adult partners and as per the partnership deed she had an interest of 20 per cent. in the profit and loss of the firm. In view of this fact, the Income-tax Officer refused the registration of the firm by holding that the partnership deed was not valid and consequently registration would not be granted. He further opined that such a minor could have been admitted only to the benefits of the partnership and she could not be made a full-fledged partner responsible for the loss of the firm also. In an appeal preferred by the assessee, the Appellate Assistant Commissioner agreed with the Income-tax Officer. On a further appeal preferred by the assessee to the Income-tax Appellate Tribunal, the Income-tax Appellate Tribunal allowed the appeal, vide its judgment and order dated January 17, 1986, on its file I. T. A. No. 707/Hyd of 1983. It is in those circumstances the Revenue sought six questions to be referred to this court, but the Income-tax Appellate Tribunal referred only the question as extracted above. The Income-tax Appellate Tribunal held that though the minor partner has not exercised her option as require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its constitution as specified in the instrument of partnership, and (a) if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified, he shall pass an order in writing registering the firm for the assessment year ; (b) if he is not so satisfied, he shall pass an order in writing refusing to register the firm." From the combined reading of sections 184 and 185 of the Income-tax Act it is clear that whenever a partnership is evidenced by an instrument it shall not be signed by the minor partners. As per section 30 of the Indian Partnership Act a person who is a minor may be admitted to a partnership firm to the benefits of the partnership and such a minor cannot be made liable for the loss of the firm unless he elects within six months of his attaining majority to become a partner of the firm by giving a public notice and such notice shall determine his position as regards the firm. It is further provided in the proviso to sub-section (5) of section 30 of the Partnership Act that if he fails to give such a notice he shall become a partner in the firm on the expiry of the said six months. A combined reading of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court of Kerala in CIT v. Phair Laboratories [1985] 154 ITR 141. It is no doubt true that in the said judgment the High Court of Kerala held that it is not necessary that a firm should have come into existence on the basis of a written instrument and a firm could be constituted on the basis of an oral agreement and hence all that is required is that there should be a valid instrument of partnership at the relevant time, i.e., during the previous year of assessment when the registration is sought. The facts of that case are distinguishable from the facts of this case in the sense that "she" had attained majority in the year previous to the assessment year 1965-66 and it was in those circumstances that the said High Court held that the partnership once registered could not have been cancelled by the Income-tax Officer. We are unable to read the said decision as laying down the law that a partnership based on an invalid instrument could be registered after a minor partner has attained majority without his exercising the option specifically. In a Division Bench judgment of this court in Choudry Brothers v. CIT [1986] 158 ITR 224, which relates to the assessment year 1966-67, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act defines 'partnership'. 'Partnership' 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. Section 30 of Partnership Act declares that a person who is a minor may not be a full partner of the firm. In the partnership deed dated July 5, 1962, it is admitted that the abovementioned Sushilchand Choudary is a minor. The partnership deed dated July 5, 1962, is, therefore, incapable of constituting a relationship of a partnership among the persons mentioned in that deed. And that deed is void. Now, for the purpose of earning the benefit of tax under the Income-tax Act, a firm has to be registered under section 184 of the Income-tax Act. For that purpose, an application has to be made to the Income-tax Officer accompanied by the instrument evidencing a partnership. If a partnership is legally recognised, the Income-tax Officer cannot decline registration of the firm under section 184 of the Income-tax Act. On the other hand, if the partnership is void, no registration can be granted. Prima facie no registration can be granted in this case. But learned counsel for the assessee argues that by the time Sushilc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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