TMI Blog1964 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... aim registration of the partnership agreement. Appeal allowed. - - - - - Dated:- 1-12-1964 - Judge(s) : P. B. GAJENDRAGADKAR., M. HIDAYATULLAH., J. C. SHAH., S. M. SIKRI., R. S. BACHAWAT JUDGMENT The judgment of the court was delivered by SHAH J.--The appellants who are a firm carrying on business in cloth at Secunderabad applied on June 30, 1955, for registration under section 26A of the Indian Income-tax Act, 1922, for the assessment year 1956-57. The following persons were, it was recited in the application, partners, having share in the profits and losses in proportions specified against their names : Rs. As. Ps. 1. Messrs. Kylasa Sarabhaiah, a firm consisting of the following partners : (a) Kylasa Veeresal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o income-tax or super-tax. (2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed ; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed. " By securing registration under the Act, the partners of the firm obtain a benefit of lower rates of assessment and no tax is directly charged on the income of the firm. This is an important benefit to which the partners of a registered firm become entitled as a consequence of registration and if it is intended to secure that benefit, requirements of section 26A and the Rules framed under the Act must be strictly complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonably construed. Under the Indian Partnership Act, 1932, partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. A firm is strictly not a person : it is an association of persons, and an agreement by which a firm purports to enter into a partnership with an individual or another firm merely makes the partners of that firm individually partners of the larger partnership. The problem posed by such a partnership agreement is under the general law academic, but the right to registration under section 26A being conditional upon specification of the individual shares of the partners, a deed of partnership between a firm and an individual, which specifies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the share of the yarn shop, and losses were to be shared in equal shares only by the major partners, K. Veeresalingam, K. Nagendrarao and K. Madhusudhanarao. The scheme of the deed therefore was that the yarn shop collectively had a share of 0-6-9 in the profits and was liable in the same proportion in the losses in the appellant-firm. Out of this 0-6-9 share, seven persons who constituted the yarn shop were entitled to share the profits, equally, whereas losses were to be shared by the three major members of the yarn shop equally. It is true that in the deed of partnership, the first partner is described as " Kylasa Sarabhaiah Yarn firm "--the yarn shop--constituted under an instrument of partnership dated May 12, 1955, and in paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions. Nor is it true to say that the yarn shop is introduced as a partner. The agreement is in truth between three major members out of those who constitute the yarn shop and four outsiders. Each of them has signed the application and the covenants of the partnership agreement bind the partners individually. Indication in the deed of partnership that three of them held qua the yarn shop a certain relation did not affect their status as partners of the appellant-firm individually. It was urged that in the deed dated February 20, 1952, constituting the yarn shop, as amended by the deed dated May 12, 1955, no profit-sharing ratio was mentioned. But we are not concerned with the registration of the yarn shop. We are unable to appreciate h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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