Sikri, J. - (1.) These two appeals pursuant to a certificate granted by the High Court of Mysore under S. 66A (2) of the Income-tax Act, 1922, are directed against its judgment answering the question referred to it in favour of the respondent-assessee. The question referred to is:"Whether the assessee, Mohandas Sadhuram, can be granted registration under S. 26-A of the Indian Income-tax Act on the basis of the partnership deed made on 1-4-1952 for the assessment year 1953-54 and on the basis of the said deed read with the supplementary deed on 1-4-1953 for the assessment year 1954-55."
(2.) The respondent M/s. Shah Mohandas Sadhuram, hereinafter referred to as the assessee is a firm. The assessee claimed registration under S. 26-A of the Indian Income-tax Act on the strength of a Partnership Deed executed on April 1, 1952. As the answer to the question in part turns on the construction of the deed, the relevant clauses may be set out here. The partnership deed first describes the parties and then recites: "Whereof the above four members were till this day members of a Joint Family, whereof yesterday that is on 31-3-1962 the said four members have become divided not only in interest but also by metes and bounds, each of the said members taking to his share one fourth (1/4) of the said joint family assets and liabilities as detailed in the books of account as maintained by the firm known as Seth Mohandas Sadhuram and whereof we the first and second members have decided to constitute all the said four members as a partnership admitting the third and fourth members thereof to the benefits of the said partnership but not to the liabilities thereunder." The first and second members referred to in the recital are Atmaram and Doulatram, both majors. The other relevant clauses are as follows: "(4) The said firm is agreed to do business of Banking and Commerce (which term includes all that is usually and customarily is understood to be done thereunder) and also to deal in Automobiles business. The Automobiles business having been started by the said first and second members under the name and style of Vijaya Automobiles Mysore, when they were members of the said joint family as a partnership venture apart from the said family, it is agreed between us now that the said Automobiles business shall hereafter be continued to be done under the name and style of Vijaya Automobiles as part of the said firm. ********** ********** (7) It is agreed that the capital contribution of each member will be equal and the accounts to be maintained to indicate the said capital contribution, will show what each member has no contributed in the personal capital ledger account. (8) It is further agreed that after debiting all working expenses inclusive of those referred to in para 6 supra, the profits of the firm less six pies every rupee of profits which will be reserved for Charity Fund will be distributed pro rata according to the proportion of capital investment as detailed of each members all to be paid to his account in the books of account from where each member can draw. The losses are agreed to be shared by the members in the like manner. The share of profits for the 3rd and 4th members will be paid to them, the said profits to be credited to their accounts, and from there their maintenance charges and other expenses of necessities if any may be drawn by the said Guardian from the said accounts. (10) It is agreed that the duration of this partnership will be for a period of one year, i.e., from 1st of April 1952 to 31st March, 1953, and the members might agree to continue the said partnership even thereafter under these terms or on terms to be determined then. (11) It is agreed that the profits and losses of the Bombay branch and other branches if any outside the State of Mysore will be credited or debited separately in the books of account of these branches and final allocation made in those books of account, as distinct from the profits and losses of the firm in State of Mysore. (12) It is agreed that the first and the second members do maintain proper accounts as is customarily to be maintained."
(3.) For the assessment year 1953-54, the Income-tax Officer rejected the application for registration on the ground that "in the case of the assessee, the minors are made parties to a contract by the eldest brother acting on their behalf. The minor has actually been debited with a share of loss. Taking these facts into account, I hold that the partnership is not entitled to the benefits of registration". For the assessment year 1954-55, he also rejected the application but added this further ground that "a supplementary deed of partnership extending the life of the partnership beyond 1-4-1953 for a further period at the will of the partners is filed. This is on 10 annas stamp paper. (The supplementary deed rests on cl. 10 of the original deed). I have already held that the original deed is not registrable. The supplementary deed cannot confer any fresh rights in the matter.";