Rao, C.J. - (1.) The Income-tax Appellate Tribunal, Madras Bench"B" has referred the following question under Section 66 (1), Income-tax Act to the High Court of Judicaqture, Madras: "Whether it is open to the Income-tax Officer, after holding that a firm is genuine, to pass an order refusing registration under the provisions of S. 26-A, Income-tax Act purporting to be under Section 23 of the Act".The reference has been transferred to this Court after its constitution.
(2.) The assessee firm had five partners, one of whom was a minor represented by his father and guardian. The partnership was reduced to writ-guardian. The partnership was reduced to writing and it was registered under S. 26-A of the Act for the assessment year 1949-50. For the assessment year 1950-51, an appslication ofr the renewal of registration of the firm was filed under Section 26-A of the act on 30-9-1950. As objection was taken to that deed on the ground that one of the partners was a minor, a fresh deed of partnership was executed on 12-10-1950 byall the partners including thequondam minor as by that time he also became a major.For the assessment year 1950-51 as the assessee made default underSection 22 (4) of the Act, he made the assessment underS. 23 (4). On the same day, he passed an order on the application made under Section 26-A refusing registration on the ground that the deed was illegal as the minor was made liable to shasre thelosses. He also made an observation at the end of the order to the following effect: "At any rate I am unable to register the firm now inasmuch as the assessment of the firm is made under S. 23 (4) of the Act".When theassessee preferred an appeal against that order,, it was dismissed by the Assistant Appellate Commissioner. The assessee preferred an appeal to the Tribunal. The Tribunal held that the partnership deed was valid on the ground that thedocument should be viewed as conferring only the benefits of the partnership on the minor. Indeed the correctness of this position was not canvassed on behalf of the Income-tax Officer before them. They further held that the order refusing registration was not made under Section 23 (4) of the Act, and as the said deed was othewise valid, it should have been registered under Section 26-A of the Act.On the aforesaid facts, at the instance of the Commissioner of Incoem-tax the aforesaid question was referred to the High Court.
(3.) Learned Counsel for the Commissioner contended that the order was made under Section 23;