Subba Rao, J. - (1.) This appeal by certificate raises the question whether the Income-tax Officer can refuse to register a genuine partnership entered into between more than 2 persons on the ground that one of them is only a benamidar for another.
(2.) The relevant facts may briefly be stated. Three persons by name Abdul Rahim Valibhai, Abdulla Rehman and Abdul Rahim Malanghbhai, constituted a partnership having 9 annas, 3 annas and 2 annas share, respectively. The said partnership was carrying on business in goat and sheep skins. From the beginning of Samvat year 2012 (15th November, 1955 to 2nd November 1956) there was a change in the constitution of the said firm. A 4th partner by name Abdul Rehman Kalubhai was inducted into the partnership with 2 annas share carved out of the 9 annas share of Abdul Rahim Valibhai. The said Abdul Rehman Kalubhai is a nephew of Abdul Rahim Valibhai. On March 6, 1956, a partnership deed was executed between the said 4 persons. Under the said partnership, Abdul Rahim Valihhai, Abdulla Rehman, Abdul Rahim Malangbhai and Abdul Rehman Kalubhai had 7 annas, 5 annas, 2 annas and 2 annas share, respectively. On May 8, 1956, the said firm presented an application to the Income-tax Officer for its registration under S.26-A of the Indian Income tax Act, 1922, hereinafter called the Act. The Income-tax Officer held that the partnership was a bogus one and, on that finding, refused to register it. The assessee took up the matter on appeal to the Appellate Assistant Commissioner, who held that the partnership agreement was valid in law and that the fact that one of the partners was a benamidar of another was not a ground for refusing to register the firm, though it might entitle the Income-tax Officer to consider the income pertaining to the share of the benamidar as part of the income of the real owner in assessing the latter's income to tax. The Income-tax Officer questioned the correctness of the decision by preferring an appeal to the Appellate Tribunal Bombay Bench. The Tribunal also held that the partnership was a genuine one and that the fact that one of the partners gave away a small part of his share to his nephew would not disqualify the partnership from being registered under S. 26-A of the Act. At the instance of the Revenue the following question was referred to the High Court: "Whether a partnership in which one partner is the benamidar of another partner could be registered under S. 26-A of the Indian Income tax Act." The learned Judges of the High Court thought that the question as framed did not really bring out the true matter in controversy between the parties and, therefore, they reframed the question as follows: "Whether on the facts and in the circumstances of the case, the partnership constituted under the instrument of partnership dated 6th March, 1956 could be registered under S. 26-A of the Indian Income tax Act." The learned Judges answered the question in the affirmative. They held that as the partnership was a genuine one the fact that one of the partners had no beneficial interest in his share by reason of some arrangement between him and another partner would not disentitle the firm from being registered under the Act. Hence the appeal.
(3.) Mr. Rajagopala Sastri, learned counsel for the Revenue, raised before us the following two points:(1) Abdul Rehman Kalubhai is only a dummy and, therefore, the partnership is not a genuine one:(2) even if Abdul Rehman Kalubhai is a benamidar of Abdul Rahim Valibhai in respect of the 2 annas share in the partnership, Abdul Rahim Valibhai has in fact 9 annas share in the partnership:as the partnership deed shows that he has only 7 annas share instead of 9 annas share there is no correct specification of his individual share within the meaning of S. 26-A of the Act and, therefore, the Income-tax Officer rightly rejected the firm's application for registration under S. 26-A of the Act.;