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TMI Blog1965 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... rtnership deed made on April 1, 1952, for the assessment year 1953-54 and on the basis of the said deed read with the supplementary deed on April 1, 1953, for the assessment year 1954-55. " The respondent, M/s. Shah Mohandas Sadhuram, hereinafter referred to as the assessee, is a firm. The assessee claimed registration under section 26A of the Indian Income-tax Act, on the strength of a partnership deed executed on April 1, 1952. As the answer to the question in part turns on the construction of the deed, the relevant clauses may be set out here. The partnership deed first describes the parties and then recites : " Whereof the above four members were till this day members of a joint family, whereof yesterday that is on March 31, 1962, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the personal capital ledger account. (8) It is further agreed that after debiting all working expenses inclusive of those referred to in paragraph 6 supra, the profits of the firm less six pies per every rupee of profits which will be reserved for charity fund will be distributed pro rata according to the proportion of capital investment as detailed of each member, all to be paid to his account in the books of account, from where each member can draw. The losses are agreed to be shared by the members in the like manner. The share of profits for the third and fourth member will be paid to them, the said profits to be credited to their accounts, and from there their maintenance charges and other expenses of necessities if any may be dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rests on clause 10 of the original deed). I have already held that the original deed is not registrable. The supplementary deed cannot confer any fresh rights in the matter. " The Appellate Assistant Commissioner, on appeal, upheld the orders of the Income-tax Officer in respect of both the assessment years. On further appeal, the Appellate Tribunal, following the decision of the Madras High Court in Jakka Devayya and Sons v. Commissioner of Income-tax, construed the deed as having admitted the minors only to the benefits of the partnership. It accordingly held that the assessee was entitled to be registered for both the years. At the instance of the Commissioner of Income-tax, the Tribunal referred the question already set out abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from that which was formed by the instrument. It further held that section 30 of the Indian Partnership Act was designed to confer equal benefits upon the minor by treating him as a partner but it did not render a minor a competent and full partner, and any document which made a minor full partner could not be regarded as valid for the purpose of registration. But the facts in that case were that in the instrument of partnership Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital. It was also provided that " all the four partners were to attend to the business, and, if consent was needed, all the partners including the minor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that capital may have been contributed on behalf of a minor and that a guardian may on behalf of a minor sever his connection with the firm. If the guardian is entitled to sever the minor's connection with the firm, he must also be held to be entitled to refuse to accept the benefits of partnership or agree to accept the benefits of partnership for a further period on terms which are in accordance with law. Sub-section (5) proceeds on the basis that the minor may or may not know that he has been admitted to the benefits of partnership. This sub-section enables him to 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital. We are unable to agree. If it is one of the terms on which benefits of partnership are being conferred, either the guardian must refuse to accept the benefits or he must accept this term. In some cases such an agreement by a guardian may be avoided by the minor, if it was not entered into for his benefit, but the agreement will remain valid as long as it is not avoided by the minor. Regarding clause 10, Mr. Karkhanis submits that this embodies a clear agreement enabling the minor to continue the said partnership even thereafter under these terms or on terms to be determined then, and, therefore, this clause is void. We can find no defect in this clause. The duration of a partnership has to be fixed between the major members, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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