Decided on June 20,1966



- (1.)THIS reference under s. 66(1) of the Indian IT Act, 1922, concerns assessments made for the years 1956-57, 1957-58, 1958-59 and 1959-60. The assessee was described in the orders of assessment as an unregistered firm composed of a certain Raja, Venkatarama Chetty, and his son, Govindarajulu.
(2.)IT is undisputed that a certain Thiruvengadam Chetty was the grantee of a mining lease under the provisions of the Mines and Minerals (Regulation and Development) Act, 1948, and the Mineral Concession Rules, 1949. There was an assignment of this lease by Thiruvengadam Chetty to Venkatarama Chetty on 31st Oct., 1954. Venkatarama Chetty formed a partnership along with six others on 1st Nov., 1954, for carrying on the mining operations. There was again a second assignment by Thiruvengadam Chetty of the identical mining lease on 11th Feb., 1955, once again to Venkatarama Chetty. On 1st July, 1955, Venkatarama Chetty formed a second partnership, the partners being himself and his son, Govindarajulu.
There were applications for registration under s. 26A of the Indian IT Act, 1922, in respect of each one of the four periods with which we are concerned in this reference. Those applications were refused by the ITO, and the appeals preferred by the assessee to the AAC and the Tribunal were dismissed. The refusal of the applications was founded on the view that the partnership on behalf of which applications were sought were not genuine, in the sense that the assignments of the mining lease by Thiruvengadam Chetty to Venkatarama Chetty once in the year 1954, and again in the year 1955, were not valid assignments, since the previous sanction of the State Government was not obtained in regard thereto under r. 37 of the Mineral Concession Rules. This, in our opinion, is how we should understand what was said, although the Tribunal in some part of its order made a casual reference to the fact that there was a power of attorney executed by Thiruvengadam Chetty in favour of Venkatarama Chetty after the assignment on 31st Oct., 1954, and observed in that context that the execution of the power of attorney militated against the assignment.

In regard to the application for registration, for one part of the assessment year in 1956-57, the view taken by the ITO was that the application was made beyond the time prescribed for that purpose. The four questions which we are called upon to decide read :

"(i) Whether it was open in law to the Tribunal to reject the application for registration (or renewal of it) of the partnership deed dt. 1st Nov., 1954, on the ground that the application filed for obtaining registration of the same was belated when neither the AAC nor the ITO had rejected the application for registration (or renewal of it) on the ground of the belatedness of the said application ? (ii) Whether a partnership formed for working mines on the assignment or permission of a person, who held a valid lease from the State Government, is hit as being prohibited by the Mines and Minerals (Regulation and Development) Act, 1948, and the Rules made thereunder ? (iii) And even if there is no prohibition, is a partnership of the type mentioned entitled to registration ? (iv) Even if the assignment mentioned in question No. 2 is held to be void for lack of sanction of the State Government, can the partnerships, which are in the nature of collateral agreements, be held to be illegal or forbidden by law ?"

(3.)THE first question relates to a period of only three months forming part of the asst. yr. 1956-57. THE application for registration was sought by the firm of which Venkatarama Chetty, the assignee from Thiruvengadam Chetty, and six others were partners under the instrument of partnership executed on 1st Nov., 1954. THE ITO, the AAC and the Tribunal alluded to the fact that the application, which concerned the period of three months, was made beyond the period prescribed, although as Mr. Visvanatha Iyer, appearing for the assessee, contends that the delay in making the application did not constitute the foundation of the refusal of the registration. However that may be, Mr. Visvanatha Iyer did not contend that the answer to the first question should be in favour of the assessee. He very frankly admitted that, since the application in respect of that period of three months was made beyond the period prescribed, the answer to the first question should be against the assessee and we answer it accordingly. Questions Nos. 2, 3 and 4 cover the same ground although they are worded in somewhat different phraseology. Mr. Rajasekhara Murthy, appearing for the respondent, made the submission that the real question which we should decide is that presented by the second question and that the answer to the third and the fourth questions would depend upon our answer to the second. We think Mr. Rajasekhara Murthy is right in making this submission.
Now, the second question, we must observe, is somewhat awkwardly worded. That question asks us to say whether a partnership for continuing mining operations, on an assignment made by a person who holds a lease or on his permission, is prohibited by the Mines and Minerals (Regulation and Development) Act, 1948 (to which we shall refer as "the Act") and the Mineral Concession Rules) to which we shall refer as "the Rules".) It is common ground that Thiruvengadam Chetty was granted a mining lease. It is also common ground that there were two assignments of that lease by Thiruvengadam Chetty to Venkatarama Chetty. The first was on 31st Oct., 1954, and the second was on 11th Feb., 1955. The 37th rule of the Mining and Mineral Concession Rules authorises a transfer by a lessee of his rights under a mining lease, provided such transfer is preceded by the sanction of the State Government, and the transferee has a certificate of approval to which rr. 6 and 7 refer. Venkatarama Chetty, the transferee, was, it is not denied, a holder of certificate of approval. But what appealed to the Tribunal and the others who decided the matter was that, since the assignment to Venkatarama Chetty was not preceded by the sanction of the State Government, the assignment was not properly made and was made in disobedience to r. 37. That was the reason on which was founded the conclusion that there was no genuine partnership and that the partnership was formed in disobedience to law.

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