Sikri, J. - (1.) These two appeals pursuant to a certificate granted by the High Court of Mysore under section 66A(2) of the Income Tax Act are directed against the judgment of the High Court answering the question referred to it in favour of the respondent-assessee. The question referred to is :"Whether the assessee, Messrs. Shah Jethaji Phulchand can be granted registration under section 26A of the Income Tax Act on the basis of the deed made on November 20,1950, for the assessment year 1953-54 and/or 1954-55 -
(2.) The relevant facts are these. The respondent M/s. Shah jethaji Phulchand hereinafter called "the assessee", is a firm constituted by a partnership deed dated November 20, 1950. The assessee sought registration of the firm under section 26A of the Income Tax Act for the assessment years 1953-54 and 1954-55. The deed of partnership was entered into between five years : (1) Nathmal Jethaji, (2) Phulchand, (3) S. Babulal, minor son of jethaji; (4) Sakalchand Thikmaji and (5) Jethibai. The relevant clauses of the agreement on which the learned counsel have made comments are these : 3. Whereas the above 5 parties have agreed to do business of cotton and kapas, purchases, and sales and on commission basis, etc. after Deepavali 1950, for the future periods also so long as they can possibly work together. 4. Now they agree between the above 5 parties as hereunder : (1) That the above five parties shall establish cotton business, and carry on the same at Davangere with branches in the surroundings areas under the name and style "Jethaji Phulchand". (2) That the capital of the business shall be Rs. 2,75,000 contributed from the parties of the firm : The 1st Party shall contribute of Rs. 1,56,000 (One lakh fifty-six thousand). The IInd parry shall contribute Rs. 22,500 (Twenty-two thousand five hundred). The IIIrd party shall contribute Rs. 70,000 (Seventy thousand). The IVth Party shall contribute Rs. 22,500 (Twenty-five thousand five hundred). The Vth party shall contribute Rs. 10,000 (Ten thousand). (3) that all the business of partnership shall be carried on in the name of the partnership only and that the partners shall be at liberty to carry on cotton business in their individual capacity with different capital without the consent of other parties. The partners doing business in their individual capacity need not disclose their profits of the individual business to the other partners of this partnership. (4) That this partnership shall have effect from Deepavali 1950 as previously agreed and as the same as already been working as such with effect from that date and the same shall be in existence for such periods as the parties desire. The partnership shall be terminated at the will of any of the partners. (5) That the partners shall have a right to borrow any money required for partnership business at prevailing rate of interest. (6) That the profits and loss of the company shall be shared by the partners in the following proportions irrespective of the contribution of the capital. 1st party shall be entitled to Rs. 0-3-6 IInd party shall be entitled to Rs. 0-3-0 IIIrd party shall entitled to Rs. 0-3-3 IVth party shall entitled to Rs. 0-3-0 Vth party shall be entitled to Rs. 0-3-3 Half an anna of the profits shall be credited to, the Charity Fund, the portion of loss to be contributed by the 3rd party is to be borne by the fist party and adjusted in the accounts. (16) That (1) Nathmal Jethaji, (2) Phulchand Nathmal, (3) Sakalchand Thikmaji, shall be working partners. They shall have the right of doing business, borrowing moneys from banks and other persons, drawing cheques on account of the firm is the banks and generally they shall have all the rights connected with business."
(3.) The Income-tax officer rejected the applications for registration for1953-54 and 1954-55 on the ground that there were no value applications for renewal of registration. Apparently the firm had been registered in the earlier assessment years.;