TMI Blog1979 (3) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... erstwhile firm and the 4th partner of this second partnership, as we may call it, was Chandrakant, son of Nagjibhai Patel. This partnership continued till 17th January, 1962, on which date Bulakhidas expired. A new deed of partnership was executed on 5th February, 1962, with which we are principally concerned. A copy of this deed of partnership is annexed as annex. "A" to the statement of case. It may be mentioned that Bulakhidas left a will dated lst January, 1962. As considerable reliance was placed on the said will by learned counsel for the assessee before the lower authorities, the Tribunal has annexed to the statement of case a copy of the said will as annex. "E". Before the ITO an application was made for registration of the new firm constituted by the deed of partnership dated 5th February, 1962. The ITO for the various reasons mentioned in his order for the year 1962-63 held that the reconsti. tuted firm was not. entitled to registration. In the first place, reliance was placed by the ITO on cl. 16 of the partnership of March, 1954, where under an heir of a deceased partner was entitled to succeed to his share in the firm and the capital, goodwill and future profits there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue that the order of the ITO was under s. 184 and not under s. 185. We are not inclined to accept the submission of the revenue on this part of the matter and, therefore, we will not advert in detail to the arguments advanced on behalf of the assessee on this point. These arguments will be noted when the said question will be answered by us. On behalf of the revenue, the arguments of learned counsel for the assessee were traversed by contending that the two executors between them could not legally be accepted to be one partner. It was pointed out that the estate as such did not have any claim for continued representation in the partnership; therefore, the beneficiaries under the will could have no claim in becoming partners in the new firm through the two executors acting jointly. In reply, learned counsel for the assessee contended that on the death of a partner the firm did not get dissolved. On the other hand, according to his contention, the new partnership with the joint executors was in continuation of the old firm. It was contended that one of the two joint executors could act for another executors It was also urged that the expression " individual " would also inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under s. 185 only on these grounds. According to the departmental representative's submission, these grounds did not exist and hence the order refusing registration could not be regarded as one made under 185. These contentions urged on behalf of the department before the Tribunal were rejected by the Tribunal. The Tribunal observed that s. 184 contains certain procedural requirements but the order passed by the ITO would be one under s. 185 ; and in the view of the Tribunal, the order passed in the instant case was clearly an appealable order. Although the Commissioner has sought a reference on this point, in our opinion, the point urged is totally devoid of merit and if the scheme of the two sections is perused, it will have to be held that the substantial ground on which registration could be refused will convert the order into one under s. 185. If there are some procedural defects in the application, the scheme of the Act evidenced by the provision contained in sub-s. (2) of s. 185 suggests that the attention of the party applying for registration is to be drawn to these defects and it is entitled to one month's time to cure such defects. In our opinion, further discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion of the ITO does not pertain to procedural defects which can be allowed to be rectified by the assesee as contemplated by s. 185(2), then the order must be regarded as one made under s. 185, and such orders have been made appealable by s. 246(j), to which we have earlier alluded. As stated earlier, as far as question No. 1 is concerned, it will have to be first ascertained who are the persons who obtain the status of partners under the deed of partnership dated 5th February, 1962. It is found from annex. 'A' to the statement of case as cyclostyled by the party and as annexed to the original statement of case that either annex. 'A' is incomplete or the original deed of partnership itself contains certain omissions which are easily perceivable when one turns to the opening words of the recitals as also to the concluding portion. As neither party has been able to give us the original deed of partnership or a copy from their records, we have to proceed with the existing unsatisfactory state of affairs. Turning to the first aspect which we have mentioned earlier, viz., the aspect of determining the persons who are constituted partners by the deed of partnership, it may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r : " Gordhanbhai Bhailalbhai Patel 25 nP. Haridas Vaghjibhai Patel 25 nP. Chandrakant Nagjibhai Patel (representing the branch of Nagjibhai Bhailalbhai Patel, deceased). 25 nP. Surajben Bulakhidas and Ramesh Bulakhidas (representing the estate of Bulakhidas B. Patel, deceased). 25 nP. " Finally, It may be pointed out that the deed of partnership ends, with the signatures, by being-mentioned that the four parties to the document have put their respective hands and seals; and the first three parties who have signed the document are the surviving partners Gordhanbhai, Haridas and Chandrakant, and the fourth party on whose behalf two persons, viz., Surajben Bulakhidas and Ramesh Bulakhidas, have signed as party of the fourth part are the two executors under the will of Bulakhidas. The signatures of Surajben Bulakhidas and Ramesh Bulakhidas are against the following description " SIGNED SEALED AND DELIVERED BY THE WITHINNAMED SURAJBEN BULAKHIDAS AND RAMESH BULAKHIDAS in the presence of ........" The argument of the learned advocate for the assessee before us was that by the deed of partnership there were five persons who became partners, viz., Gordhanbhai, Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties who together constitute the multiple entity described by law as a partnership firm must have the status of a personality in law. Such status of personality is possessed by an individual or by a limited company, and these in jurisprudence are described as natural and artificial persons respectively. It is not necessary that persons who become partners are necessarily partners in their individual capacity. They may have entered into a partnership agreement with others, representing a group, a firm, a Hindu family or some other entity which because of some restrictions or lack of capacity or other reason may not be entitled directly to be a partner or does not wish to be one. Thus, ordinarily two persons together or collectively cannot be considered to be one single partner of a firm. It was, however, urged that there are a number of decisions of the Supreme Court in which such partnership has been accepted as valid; and it will, therefore, become necessary to consider these Supreme Court decisions. In Kylasa Sarabhaiah v. CIT [1965] 56 ITR 219, where the Supreme Court had before it the case of a firm, the larger firm B as described in the headnote, was constituted under a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that one or more of the partners may represent some other entity and that entity may collectively or in some specified proportion be entitled to the share of profits earned by these persons, would not affect the question of validity of the partnership. That, however, is not the case before us. The position may have been different had we been able to accept the contention of the learned advocate for the assessee that both Surajben and Ramesh, considered separately and individually, became partners under the deed of partnership. We have not been able to accept the said contention. The true position under the deed of partnership as it appears to us is that the two of them jointly or collectively have been constituted a single partner and it is only when they act jointly that they can purport to exercise the rights of a partner. In our opinion, such a partner is not contemplated in law and a partnership having such a partner cannot be considered to be legally valid. If there is an agreement constituting such a partnership, it will have to be regarded as being contrary to law and, therefore, on that count, in our opinion, the ITO was entitled to refuse registration. It may b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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