TMI Blog1965 (4) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... on 26A of the Income-tax Act, and the answer to the question referred is in the affirmative. Appeal dismissed. - - - - - Dated:- 15-4-1965 - Judge(s) : J. C. SHAH., S. M. SIKRI., K. SUBBA RAO. JUDGMENT The judgment of the court was delivered by SIKRI J.---These two appeals pursuant to a certificate granted by the High Court of Mysore under section 66A(2) of the Income-tax Act, 1922, are directed against its judgment answering the question referred to it in favour of the respondent-assessee. The question referred to is : " Whether the assessee, Mohandas Sadhuram, can be granted registration under section 26A of the Indian Income-tax Act, on the basis of the partnership 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and from there their maintenance charges and other expenses of necessities if any may be drawn by the said guardian from the said accounts. (10) It is agreed that the duration of this partnership will be for a period of one year, i.e., from 1st of April, 1952, to 31st March, 1953, and the members might agree to continue the said partnership even thereafter under these terms or on terms to be determined then. (11) It is agreed that the profits and losses of the Bombay branch and other branches if any outside the State of Mysore will be credited or debited separately in the books of account of these branches and final allocation made in those books of account, as distinct from the profits and losses of the firm in the State of Mysore. (12) It is agreed that the first and the second members do maintain proper accounts as is customarily to be maintained. " For the assessment year 1953-54, the Income-tax Officer rejected the application for registration on the ground that " in the case of the assessee, the minors are made parties to a contract by the eldest brother acting on their behalf. The minor has actually been debited with a share of loss. Taking these facts into acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t held in Commissioner of Income-tax v. Dwarkadas Khetan Co. that the Income-tax Officer was only empowered to register a partnership which was specified in the instrument of partnership and it was not open to the department to register a partnership 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 had to give their consent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books, and was given the right to vote, if a decision on vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Let us then examine the partnership deed in the light of these principles. It need hardly be stated that the partnership deed must be construed reasonably. The recital set out above expressly states that it is the major members who had decided to constitute the partnership and admit the minors to the benefits of the said partnership. The rest of the clauses must be construed in the light of this recital. Clause 4 only states the business to be carried on and the name of the business. It seems to us that the expression " it has been agreed between us " has reference to the agreement mentioned in the recital. Regarding clause 7, which deals with capital contribution, it is urged that a guardian is not entitled to agree to contribute capital. We are unable to agree. If it is one ..... X X X X Extracts X X X X X X X X Extracts X X X X
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