DIXIT,C.J. - (1.) IN this reference under S. 66(I) of the Indian IT Act, 1922, at the instance of the CIT, Madhya Pradesh, Nagpur and Bhandara, the question referred for our decision is : "Whether in the facts and circumstances of the case the firm Hukumchand and Mannalal Co. could be granted registration under S. 26A of the Act ?"
(2.) THE material facts, as found by the Tribunal and set out in the statement of the case submitted by the Tribunal, are that the assessee -firm, Sir Hukumchand Mannalal & Co., Indore, was constituted on 16th July, 1948, by a deed of partnership of that date for carrying on the business as managing and selling agents of the Hukumchand Mills Ltd., Indore (hereinafter referred to as the mills). The five partners, according to this deed, were Sir Hukumchand Sarupchand, Chunnilal Onkarmal Ltd., Rajkumarsingh Hukumchand, Ramkumar Morarka & Sons Ltd., and Mannalal Onkarmal. The share of each of the first three partners was four annas, and of the remaining two partners was two annas each. Before the formation of this partnership, the joint Hindu family of Sir Hukumchand was the managing and selling agents of the mills. It has been found by the AAC, as well as by the Tribunal, that in the partnership, which came into existence on 16th July, 1948, Sir Hukumchand Sarupchand and his son Rajkumar Singh represented as partners in the firm the share and interest of their HUF. On or about 31st March 1950, a partition of the HUF took place, and thereafter, the share and interest of the family in the firm along with the family's other business were transferred to a private limited company styled as "Sir Sarupchand Hukumchand Ltd." The Tribunal has found that : "The shares in this company were held by the members of the erstwhile HUF. The share and interest in the names of Sir Hukumchand and that of his son Rajkumar Singhji were transferred to this new company. In other words, the share and interest of both the father and the son were held by them on behalf of the HUF and hence, were made the subject of a partition on 31st March, 1950. Sir Hukumchand and Rajkumar Singh became partners in the assessee -firm on behalf of the HUF and the share and interest in the firm held by them beneficially belonged to the HUF." Under certain agreements concluded in 1950 between Mannalal Onkarmal and five other parties, including Chunnilal Onkarmal Ltd., Mannalal agreed to share his two -annas share in the assessee - firm with them, and in this division of Mannalal's profits in the assessee -firm Chunnilal Onkarmal Ltd., which had already four annas share in the assessee -firm, was given twenty - seven per cent of Mannalal's two -annas share in the assessee - firm.
(3.) THE assessee -firm's application for renewal of registration under S. 26A for the asst. year 1954 - 55, of which the accounting year ended on 31st March, 1954, was rejected by the ITO, Indore, on several grounds. The assessee then preferred an appeal before the AAC, Indore, who, while not accepting any of the grounds given by the ITO for refusal of registration, upheld the rejection of the renewal application on the ground that Sir Hukumchand Sarupchand and Rajkumar Singh, partners in the firm, were initially members of an HUF whose interest they represented; that more than one co -parcener could not represent a HUF in the same partnership for the reason that a partnership involved a contract inter se between the partners; and that consequently, there would be a contract of partnership between two co -parcener partners in respect of the property benefically held by the HUF, and this would be inconsistent with their position as coparceners of the HUF.;