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TMI Blog1964 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... Ps. 1. Messrs. Kylasa Sarabhaiah, a firm consisting of the following partners : (a) Kylasa Veeresalingam (b) Kylasa Nagendrarao (c) Kylasa Madhusudhanarao 0 6 9 2. Mahendrakar Narayanarao 0 3 3 3. Nune Vittayya 0 2 6 4. Pottupalli Chandrayya 0 2 6 5. Gande Ramayya 0 1 0 For facility of reference we will call No. 1 " the Yarn Shop ". The Income-tax Officer rejected the application, and his order was confirmed in appeal by the Appellate Assistant Commissioner and by the Income-tax Appellate. Tribunal. The Tribunal held that because in the deed of partnership benefits to which certain minors were admitted, and particulars " about the distribution of profits or losses in the manner in which the firm wanted the same to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quirements of section 26A and the Rules framed under the Act must be strictly complied with. Rule 2 framed under section 59 requires that the application shall be signed by the partners (not being minors) personally, and prescribes the period within which the application shall be made for the year in question. Rule 3 provides that the application shall be made in the prescribed form and shall be accompanied by the original instrument of partnership under which the firm is constituted. By rule 4 it is provided that if on receipt of the application, the Income-tax Officer is satisfied that there is or was a firm in existence constituted as shown in the instrument of partnership, and that the application has been properly made, he shall enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partners, a deed of partnership between a firm and an individual, which specifies the collective share of the firm, without more, cannot be registered. It has been held by this court in Dulichand Laxminarayan v. Commissioner of Income-tax that a partnership constituted between an individual, a joint Hindu family and three firms could not be registered under section 26A of the Act. In Dulichand's case the partnership deed was signed by five individuals, viz., the karta of the joint Hindu family, one partner each of the three firms and the individual. It was held that the partnership could not be admitted to registration, because a firm as such cannot enter into an agreement as partner with another firm or individual, and also because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hop--constituted under an instrument of partnership dated May 12, 1955, and in paragraphs 3 and 8 this yarn shop is also described as the first partner. But the substance of the agreement cannot be permitted to be overshadowed merely by the use of the collective description of some of the persons who agreed to be partners. The agreement was between K. Veeresalingam, K. Nagendrarao, K. Madhusudanarao, Mahendrakar Narayana Rao, Noone Vittoyya, Pottipalli Chandrayya and Gande Ramayya to enter into a partnership with the covenant that the profits and losses shall be divided in the shares specified in the instrument. The partnership agreement was signed by the major partners ; the application for registration was in conformity with the Rules fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not concerned with the registration of the yarn shop. We are unable to appreciate how a defect (even if there be one in the agreement constituting the yarn firm) affects the right of the appellant-firm to be registered. If the statutory conditions which qualify the appellants for registration are fulfilled, an arrangement between some of the partners of the appellants which binds them to distribute the profits under a stipulation which is not a part of the partnership agreement does not affect the right to claim registration of the partnership agreement. The answer recorded by the High Court must, therefore, be discharged, and an affirmative answer must be recorded. The appeal is allowed. The appellants will be entitled to their cos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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