Shah J. - (1.) A deed of partnership for carrying on the business of a sugar factory in the name and style of M/s. Ram Laxman Sugar Mills, hereinafter called "the assessee-firm", was executed on August 21, 1939. There were two parties to the deed, the first party being Lala Suraj Bhan of Delhi representing the joint Hindu family of Dina Nath Nanak Chand, and Lala Debi Pershad, Lala Jwala Pershad, Lala Sheo Pershad, Lala Ganpat Pershad Lala Maidhan, Lala Mai Diyal and Lala Matu Ram collectively referred to as the second party. There was a partial partition on August 21, 1947, among the members of Dina Nath Nanak Chand and the joint family status was severed. By deed dated September 8, 1943, the eight annas share which was allotted to Lala Suraj Bhan in the assessee firm was divided between the four members of the family : four annas going to Lala Suraj Bhan and the remaining four annas to three other members. By a subsequent deed dated March 18, 1950, this arrangement was confirmed. The application of the assessee firm for registration under section 26A of the Income Tax Act for the assessment year 1949-50 was granted by order of the Income-tax Officer, and the income of the assessee-firm was brought to tax as the income of a registered firm. Registration of the assessee-firm for the year 1950-51 also was granted by the Income-tax Officer, but the order was cancelled by the Commissioner of Income-tax in exercise of the power under section 33B of the Income Tax Act. The Commissioner was of the view that under the deed of partnership the joint Hindu family of Dina Nath Nanak Chand had become a partner and as soon as the joint family status was severed the Partnership deed became inoperative, since the deed "represented a state of affairs which had become non-existent."
(2.) In appeal, the Income-tax Appellate Tribunal confirmed the order, but on different grounds. The Tribunal observed that under the deed of partnership all the members of the joint family of Dina Nath Nanak Chand called the first party and the other partners referred to as the second party has entered into the contract of partnership. Such partnership could in the opinion of the Tribunal be registered only if all the members who were partners signed the instrument of partnership and also the application for renewal of registration, and since all the members of partnership had not signed the application for renewal of registration, registration could not be granted.
(3.) The Tribunal referred under section 66(1) of the Income Tax Act, 1922, the following question to the High Court of Judicature at Allahabad; "Whether, on the facts and in the circumstances of the case, the order canceling renewal of registration was proper and justified - ;