NATIONAL MOTOR COMPANY Vs. COMMISSIONER OF INCOME TAX
LAWS(BOM)-1962-10-13
HIGH COURT OF BOMBAY
Decided on October 01,1962

NATIONAL MOTOR COMPANY Appellant
VERSUS
COMMISSIONER OF INCOME TAX Respondents


Cited Judgements :-

COMMISSIONER OF INCOME-TAX VS. STANDARD PLASTIC INDUSTRIES [LAWS(P&H)-1976-10-13] [REFERRED TO]
PANDEY S P VS. COMMISSIONER OF INCOME TAX [LAWS(PAT)-1973-8-15] [REFERRED TO]


JUDGEMENT

Y.S.TAMBE, J. - (1.)THIS is a reference under Sub -S. (1) of S. 66 of the Indian IT Act. The assessee is a partnership firm consisting of three partners. It appears that these three partners entered into an agreement of partnership on 18th April, 1946. The terms and conditions on which they agreed to do partnership business were reduced to writing in a deed executed on 1st April, 1947. The partnership was constituted for five years from 18th April, 1946. That period of five years expired on 17th April, 1951. We are here concerned with, the asst. year 1958 -59, the relevant previous year being the calendar year 1957. Now, even though the period mentioned in the aforesaid deed of partnership had expired on 17th April, 1951, the partnership business of the assessee firm seems to have continued to carry on the business in the relevant assessment year. The assessee firm applied for renewal of registration of the partnership for the relevant assessment year. That application was made on 17th June, 1958. The IT authorities refused to grant registration and rejected the application. The Tribunal also has affirmed the view taken by the IT authorities. Hence this reference. The question referred to us is as follows :
"Whether, on the facts and circumstances of the case, the renewal of registration of the firm for the asst. year 1958 -59 under S. 26A of the Act could be granted on the basis of the said deed of partnership dt. 1st April, 1947 ?"

(2.)MR . Kaka, appearing for the assessee, first contended that the assessee firm is constituted under a deed of partnership of dt. 1st April, 1947. That deed specifies the respective shares of the partners in the profits and losses of the firm ; and that even after the period of duration of the partnership, namely, five years, mentioned in the deed, expired on 17th April, 1951, as a result of s. 17(b) of the Indian Partnership Act, the firm continues to be constituted under the deed of partnership. In our view, the contention has little force. The effect of S. 17(b) is not what is stated by Mr. Kaka. Sec. 17(b) provides that "subject to contract between the partners, where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will." It will be seen that all that this clause provides is that after the expiry of the term mentioned in the partnership deed, only the mutual rights and duties would remain the same as mentioned. It is not the same thing as to say that the partnership that continues to do business after the expiry of the period is a partnership constituted under that deed of partnership. There is a vital difference between the two types of partnership, i.e., partnership for a fixed duration under a deed of partnership and the partnership that continues to carry on the business after the expiry of the period mentioned in the deed. In the one case, it is a partnership for a fixed duration, which can be dissolved only after the expiry of the period, save and except where on account of the misconduct of a partner dissolution is called for at the hands of the Court. Now, the partnership that continues to do business after the expiry of the term is a partnership at will, and any partner can, by giving a notice to all the partners, dissolve it or put it to an end at his sweet will. In our opinion, therefore, the partnership that continues to do business after the expiry of its term cannot be said to be a partnership constituted under the deed of partnership. The first contention raised by Mr. Kaka should therefore fail.
It is next contended by Mr. Kaka that S. 26A which confers right on a partnership to apply for registration does not require that the deed under which the partnership was constituted should be operative in the relevant assessment year. All that S. 26A requires is that there should be a deed, under which the partnership is constituted, and the deed must specify the shares of the partners. If there is such a deed, even if it ceases to be operative in the relevant assessment year, the partnership is entitled to get itself registered. It is not possible to accept this contention of Mr. Kaka. Sub -s. (1) of S. 26A confers a right on partners to apply for registration of the partnership when the partnership is constituted under a deed of partnership and the deed of partnership specifies the individual shares of the partners. Sub -s. (2) provides that "the application (for registration), 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". The relevant rules have been framed under S. 59 of the IT Act. Rule 3 provides for an application to be made in the prescribed form. Clause (2) of the prescribed form shows that the application for registration is to be accompanied either by the original instrument of partnership or a certified copy of the instrument of partnership under which the firm is constituted. Rule 4 provides that if the ITO is satisfied about certain things mentioned in the rules, he shall endorse a certificate on the instrument of partnership in the following form :

"This instrument of partnership/certified copy of an instrument of partnership has this day been registered with me, the ITO . . . . . . . . under S. 26A of the Indian IT Act, 1922, and this certificate of registration shall have effect for the assessment for the year ending on the 31st March. . . ."

(3.)RULE 6 requires a firm, to whom a certificate of registration has been granted, to apply for renewal in each assessment year before a particular date mentioned therein. The form in which an application for renewal is to be made is also similar to that for the original registration of the firm, and cl. (2) of this application form also requires that an instrument of partnership in original or its certified copy has to accompany the application for renewal of registration. Rule 6A is in the following terms :
"On receipt of an application under r. 6 the ITO may, if he is satisfied that the application is in order and that there is or was a firm in existence constituted as shown in the instrument of partnership, grant to the assessee a certificate signed and dated by him in the following form : - 'The registration of the firm of . . . . granted on . . . . is renewed by me and will remain effective for the assessment for the year ending on the 31st March . . .'"



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