TMI Blog1978 (2) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... hould vest in a body of persons consisting of Sri Prithi Raj Thard, Sm. Mahadei, wife of Sagarmal, and the two donors, namely, Sagarmal and Rameshwarlal, who were collectively referred to as the donees or trustees. According to the document, the business was to be carried on by the donees or trustees, 3/4ths of the profits accruing each year was to be allocated or distributed equally, that is to say, at 6 annas each to Sagarmal and Rameshwarlal and the remaining 1/4th share was to be allocated and distributed to a " charity account " in the ledger to be applied, or accumulated and thus set apart for religious or charitable purposes in the manner mentioned in the said document. On the 23rd May, 1952, in the assessment order, the ITO referred to the earlier partnership and also to the document dated the 6th November, 1949. The Income-tax Officer held that two of the beneficiaries, via., Sagarmal and Rameshwarlal would be assessed directly as per allocation given in the assessment order while the charity income should be assessed in the hands of the trustees. This was in respect of the assessment year 1950-51. On the 29th November, 1954, Sagarmal made a will. In the said will, he pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e remaining over in my said personal account after disbursing Rs. 70,000 (rupees seventy thousand) only therefrom as provided above would amount to nearly Rs. 1,80,000 (rupees one lakh and eighty thousand) and this amount shall be divided half and half each and transferred to separate personal accounts of my wife, Sreemati Mahadei, and of my grandson, Sree Kanhaialal Lohariwalla. The half share, that is, four annas out of my share of half of the liability, to make good the trading loss if any, accruing in any year in the business that shall devolve, on my grandson, Sree Kanhaialal Lohariwalla, by paragraph (b) above set forth, shall be reimbursed out of the sum of Rs. 90,000 (rupees ninety thousand) approximately, more or less which shall be transferred to the personal account of my said grandson, Sree Kanhaialal Lohariwalla, according to the direction left by me in this present paragraph." The other clauses of the disposition need not be referred to for our present purpose. But it may be mentioned that by clause (g) Sagarmall had stipulated as follows: (g) Under the terms of the indenture dated the sixth day of November, 1949, I have the duty, along with Sree Rameshwarlal Loha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d document also provided, inter alia, as follows : " 4. That the accounting year of the business shall continue to be the Dewali year as before or such other year as may be decided on the Donee's or the Trustees among themselves by mutual consent, and the books of account shall be adjusted according to such year or such other year as may be decided or agreed on followed by distribution or applications or appropriation or setting apart of the profits or loss, as the case may be, according to the terms and conditions and shares and manner laid down hereinbefore in view of the will and testament of the late Sagarmall Lohariwalla and the indenture dated 6th November, 1949. 5. That six annas share of the profits accruing in any year shall be allocated or distributed to the account of the party hereto of the First part, as before, and three annas share of the said profits shall similarly be allocated or distributed to the account of Sreemati Mahadei, and three annas of the same shall also be allocated or distributed to the account of the minor Sri Kanhaialal Lohariwalla, for whom his mother, Sreemati Gayatri, the party hereto of the Third Part " is acting as natural guardian, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but was to be appropriated by them to the extent of the one-fourth for charity. It was, therefore, held that the said income was not exempt under section 4(3)(i) of the Act. On the 12th March, 1968, an assessment of the assessee in the instant case was made including the share income of the minor son, Kanhaialal, from the business of the unregistered firm. The AAC deleted the share income of minor son from the total income of the assessee by his order dated the 26th February, 1970. The Tribunal by an order dated the 5th April, 1971, cancelled the reassessments for the assessment years 1951-52 to 1957-58, which had been reopened under s. 147(a) of the I.T. Act, 1971. By an order dated the 5th April, 1971, the Tribunal confirmed the reassessment made under s. 147(b) of the I.T. Act, 1961, for the assessment year 1958-59 holding, inter alia, that the firm was in existence and had not been taxed. By an order dated the 11th December, 1972, in this case, the Tribunal allowed the appeal by the revenue by holding that the share income of the minor son would be included in the income of the assessee. The present question has been directed out of the said finding of the Tribunal. The que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a deed should normally be construed reasonably and fairly and in its entirety. It is also necessary to bear in mind that in construing a deed of this nature the construction to be preferred, if two views are possible on the construction of the deed, is the one which will make the deed valid and consistent with law. This is how more or less deeds of this nature have been approached by the courts. Before we refer to the said decisions it is necessary to refer to the decision of the Supreme Court in the case of CIT v. Dwarkadas Khetan Co. [1961] 41 ITR 528, where the Supreme Court observed that a partnership deed in which a minor was admitted as a full partner was not valid. Section 30 of the Indian Partnership Act clearly laid down that a minor could not become a partner, though with the consent of the adult partners he might be admitted to the benefits of partnership. Any document which went beyond the provisions of s. 30 of the Partnership Act was invalid. Therefore, if a document, read properly, stipulated that a minor was made a full partner and not admitted merely to the benefits of the partnership, such a document would be invalid in law. It, is, therefore, necessary in const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elect, on attaining majority, either to remain a partner or not to become a partner in the firm. Thus, it contemplates that a guardian may have accepted the benefits of a partnership on behalf of a minor without, his knowledge. If a guardian can accept benefits of partnership on behalf of a minor he must have the power to scrutinise the terms on which such benefits are received by the minor. He must also have the power to accept the conditions on which the benefits of partnership are being conferred. It appears to us that the guardian can do all that is necessary to effectuate the conferment and receipt of the benefits of partnership. 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 that a guardian has purported to contract on behalf of a minor if the contract is for the purposes mentioned above. " We need not, however, consider the other clauses in the deed, which the Supreme Court had to construe, which were different from the deed before us. This court in the case of Jeewanram Gangaram v. CIT [1967] 64 ITR 483, noted at page 497, that a partnership deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partnership. Of course, as we have mentioned hereinbefore, in the case before the Bombay High Court, the guardian, who had signed on behalf of the minor, was also a partner of the firm. That is a fact which is absent in the present reference before us. Clause 6 of the deed noted before, in our opinion, is a definite indication of the fact that the minor would not be liable for the losses. It had provided for the loss of the business in clear and unequivocal terms. Such a clause was absent in the case before the Bombay High Court. In that view of the matter, we are unable to apply the ratio of the decision of the Bombay High Court in the facts and circumstances of the instant case. As we have mentioned before, clause 6 of the present deed, in our opinion, read in the background of the will of Sagarmall, clearly indicates that the minor was being only admitted to the " benefits of partnership ". We have also set out the other clauses, which indicate that in the management of the business of the firm, third party, namely, the minor, was not being given any part. These clauses, read in conjunction with and in the background of the will of Sagarmall, in our opinion, clearly establish t ..... 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