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TMI Blog1986 (3) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned as a party of the first part in the deed of partnership) is described in the opening portion of the said partnership deed as follows : "Shri Narendra L. Shah (acting as partner) for and on behalf of Indian Textile Accessories Co., the existing partnership concern registered under the Indian Partnership Act, 1932." The two companies who are the other two partners of the firm are: 1. Laxmi Wire Industries (P.) Ltd. 2. Narendra Machine Works (P.) Ltd. Shri Niranjan B. Shah and Shri Surendra L. Shah are the persons who have signed the partnership deed for and on behalf of these two companies, respectively. Clause 7 which deals with profit and loss sharing ratio is as follows: "7. The profit and loss of the partnership shall be div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmi Wire Industries (P.) Ltd., and (3) Shri Surendra L. Shah for and on behalf of Narendra Machine Works (P.) Ltd. 2. The ITO refused the registration. In the appeals filed by the assessee, the Commissioner (Appeals) observed that the firm of Indian Textile Accessories Co. was a partner of the assessee-firm and that a firm could not be a partner of another partnership firm and there can be no registration of a partnership purporting to be between a firm and other individuals. According to him, the ratio of the decision of the Bombay High Court in G.S. Dugal & Co. (P.) Ltd. v. CIT [1978] 111 ITR 757 applied as the facts were identical. On the basis of the said decision, the learned Commissioner (Appeals) held that the assessee-firm was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares of profits in the partnership. It only regulates the rights and liabilities of the partners. Consequently, a partner may enter into sub-partnership with others or he may under an agreement, be the representative of a group of persons or he may be a benamidar for another. In all such cases, he occupies a dual position. Qua the partnership, he functions in his personal capacity ; qua the third parties, whom he represents, he functions in his representative capacity. The third parties, whom he represents cannot enforce their rights against the other partners nor the other partners can do so against the said third parties. The above legal position is well established by the decision of the Supreme Court in CIT v. Bagyalakshmi & Co. [1965] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the assessee-firm and that Shri Narendra L. Shah is the person who has signed the partnership deed for and on behalf of the said firm. On the facts of this case, therefore, the principle laid down by the Supreme Court in Dulichand Laxminarayan v. CIT [1956] 29 ITR 535 would apply. In the Supreme Court case an individual, a joint Hindu family and three firms had purported to enter into a partnership and the deed had been signed by five individuals, viz., by the individual partner, the karta of the joint family, and by one partner each of the three firms. This deed of partnership was sought to be registered under section 26A of the Indian Income-tax Act, 1922, the application being signed by the same five individuals. The Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not disclosed in the partnership deed of the assessee-firm. According to the partnership deed the said firm was entitled to a share of seven anas in a rupee and was liable to bear the same share in the losses of the firm. In the account books of the assessee-firm the share of profits was credited to the account of the firm which was a partner. The partnership deed was signed by one of the partners of the firm, who was a partner. The application for registration had also been signed by one of the partners of the firm which was the partner of the assessee-firm. On these facts, following the decision of the Supreme Court in the case of Dulichand Laxminarayan the Bombay High Court held that the assessee-firm was not entitled to registration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 per cent of profit and loss on behalf of Indian Textile Accessories Co. After this deed was executed, the partnership deed with which we are concerned came into effect. That partnership deed is explicit in its terms. As already stated clause 7 of the partnership deed clearly mentions that the firm of Indian Textile Accessories Co. would be one of the parties who would share the profit and loss of the business of the assessee-firm. This clause clearly indicates that the firm of Indian Textile Accessories Co. was itself the partner of the assessee-firm and, as such, the consequences as described above would follow with the result that the registration cannot be granted. We, accordingly, confirm the order of the learned Commissioner (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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