Decided on January 31,1957



D.Falshaw, J. - (1.) These are three connected references (Civil References Nos. 8, 12, and 13 of 1954) under Section 66(1) of the Income-tax Act relating to the assessment of the petitioner firm Messrs. B. N. Dheer and Sons of Delhi for the assessment years 1949-50, 1950-51 and 1951-52, (accounting years 1948, 1949, and 1950). In the course of the last of these assessment years the assessee firm applied for registration under Section 26A of the Income-tax Act on the allegation that the partners of the firm had been carrying on the partnership business since January 1948, each of them having an eight-anna share in business, though the partnership deed in which the terms of the partnership and the shares of the partnership were set out was only drawn up on 21-6-1950. The assessee firm claimed registration under Section 26A in respect of the accounting year 1948, assessment year 1949-50, and renewal with regard to the subsequent years under consideration.
(2.) This was refused by the Income-tax Officer principally on the following grounds: "A firm can be constituted only once and of once a firm is verbally constituted, by subsequently writing a partnership deed it cannot be said that the firm is constituted under a partnership deed. In the present case the alleged firm is said to have been verbally constituted in January 1948 and the partnership deed was executed in June 1950, i.e. 2 1/2 years from the commencement of the business. The asses-see is, therefore, not entitled to registration." This view was upheld both by the Appellate Assisant Commissioner and the Appellate Tribunal. In these circumstances the following question has been referred to us: "Whether on the facts, and in the circumstances, of the case, the assessee firm could be accorded registration under Section 26A of the Income-tax Act for any of the three assessment years," The relevant words in Section 26A are: "(1) Application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purpose of this Act and of any other enactment for the time being in force relating to income-tax or super-tax."
(3.) A question arising out of an instrument of this kind came up for consideration before Kapur J.. and myself in the case of Kalsi Mechanical Works, Nandpur v. Commissioner of Income-tax, Simla, 55 Pun LR 407 : (AIR 1953 Punj 301) (A) and we held that for the purpose of registration of a firm under Section 26A of the Income-tax Act it is necessary that the firm should be constituted by an instrument of partnership and that such a firm which is constituted under an instrument of partnership should have been in existence during the accounting period and should not come into existence during the assessment year, and if it was not in existence during the account period it cannot be registered so as to affect the liabilities of the partners of income-tax accruing during the account period. Hence a firm which is alleged to have come into existence by a verbal agreement in June 1944 is not entitled to registration under Section 26A for the purpose of the assessment for 1949-50, where the instrument of partnership was drawn up only in May 1949 after the expiry of the relevant period of previous year.;

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