TMI Blog1993 (9) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961, and to treat the assessee's status as a registered firm for the assessment year 1972-73 ? 4. Whether the Tribunal should have upheld the order of the Appellate Assistant Commissioner of Income-tax directing the registration of the firm under the Income-tax Act, 1961 ? 5. Whether the Tribunal erred in law in upholding the non-granting of registration to the assessee-firm on a ground different from that on the basis of which the Income-tax Officer had declined to grant the registration ? " Oswal Fertilizers Corporation is the assessee in this reference. The assessee carries on business in fertilizers at Baramati. The reference relates to the assessment year 1972-73. The said firm was reconstituted by a deed of partnership dated November 21, 1970. The assessee applied for registration of the assessee-firm as a registered firm for the assessment year 1972-73, relying on the abovereferred deed of partnership. The Income-tax Officer rejected the application of the assessee for registration of the firm and passed an order to the effect that the assessee be assessed in the status of an unregistered firm. In appeal, the Appellate Assistant Commissioner took the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the fourth part who are the minor partners admitted to the benefits of the firm shall bear the losses including the loss of capital in the following proportions : ---------------------------------------------------------------------------------------------------------------------------------------------------- Name of partner Sharing of profit Sharing losses ---------------------------------------------------------------------------------------------------------------------------------------------------- 1. Shri Ramanlal Mulchand Oswal 25.00 per cent. 38.50 per cent. 2. Shri Parasmal Dalichand Oswal 15.75 per cent. 30.75 per cent. 3. Shri Prakash Dalichand Oswal 15.00 per cent. Nil 4. Shri Champalal Mulchand Oswal 13.50 per cent. Nil 5. Shri Bhurmal Tulsaji Oswal 15.75 per cent. 15.75 per cent. 6. Shri Sakalchand Sonmal Oswal 15.00 per cent. 15.00 per cent. --------------------------------------------------------------------------------------------------------------------------------------------------- Total 100.00 per cent. 100.00 per cent." ---------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm. The second part of the said clause provides in conjunction with the first part of the clause that the said minors shall not be liable to bear any loss including the loss of capital. The said clause further specifies the ratio in which the adults will bear the loss. The Tribunal did not consider the first part of clause 9 of the deed of partnership at all. We have, therefore, examined the deed of partnership in its entirety for the purpose of construing the same reasonably with due emphasis on clause 9 of the deed in the light of the principles laid down by the judgments of the Supreme Court and the High Courts. It is permissible in law to authorise guardians of the minors concerned to inspect the books of account and exercise certain rights to protect the minors. The guardians of the minors concerned may place their signature on the partnership deed as guardians of minors admitted to the benefits of partnership. Mere description of the minors as " partners " in clause 9 of the deed by itself did not make the minors partners in the firm when the very same clause in terms provided that the minors were merely admitted to the benefits of the firm. It is also necessary to refer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some times conferring of such powers on the guardian of the minor concerned becomes necessary for protecting and safeguarding the interest of the minor admitted to the benefits of partnership. Learned counsel for the Revenue relied on the case of CIT v. Dwarka das Khetan and Co. [1961] 41 ITR 528 (SC). In this case, the minor had himself executed the instrument of partnership. In this case, it was in terms provided by the deed of partnership that the minor will be liable to bear all the losses including the loss of capital. Such a clause was for bidden by section 30(3) of the Indian Partnership Act. In view of such an objectionable clause, it was held by the court in that case that the minor was not admitted merely to the benefits of partnership but was admitted as a full-fledged partner of the firm. In this view of the matter, it was held by the court that such a partnership could not be registered under section 26A of the Indian Income-tax Act, 1922. This case is clearly distinguishable. In the case before us, clause 9 of the deed of partnership in terms provides that the concerned minors were merely admitted to the benefits of the partnership and that the minors shall not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts the construction of the partnership deed canvassed for and on behalf of the assessee. At page 59 of the very same judgment, the Division Bench further observed as under : " Primarily, the question whether Rajendrakumar has become a full-fledged partner or was admitted to the benefits of partnership has to be decided upon scrutiny of the provisions of the indenture of partnership dated February 17, 1960....." We have construed the deed of partnership dated November 21, 1970, in this case as a whole after attaching due weightage to clause 9 of the said deed of partnership and arrived at the conclusion in the instant case that the minors concerned were merely admitted to the benefits of the partnership and not made full-fledged partners. In our opinion, the deed of partnership is valid and does not contravene any of the provisions of the Partnership Act. in CIT v. Md. Khalid Faquih and Co. [1963] 47 ITR 383 (Bom), Tambe J., speaking for the Division Bench of our High Court, in terms held that the mere description of the minor as a partner in the preamble to the deed would not make the minor a partner in the firm and invalidate the deed. In this case, the Division Bench was co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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