INCOME TAX OFFICER Vs. VINAYAKA AGENCIES
LAWS(IT)-1989-8-16
INCOME TAX APPELLATE TRIBUNAL
Decided on August 08,1989

Appellant
VERSUS
Respondents

JUDGEMENT

T.V.Rajagopala Rao, - (1.)THIS is a revenue's appeal and it relates to assessment year 1982-83. Grant of registration to the assessee-firm is contested in this appeal. A firm was formed as per the recitals found in the partnership deed dated 19-3-1980. Books of the firm were closed for the first time by 31-3-82. Form No. 11 was filed on 28-10-81 seeking initial registration of the firm. Under clause 8 of partnership deed the firm was purported to have been formed by 5 partners who stipulated to share profits and losses in the following manner : -
JUDGEMENT_13351_TLIT0_19890.htm

Form No. 11 however was signed by 4 partners and nobody signed on behalf of the fifth partner, the Deity. The partner, Lord Venkateswara has been allotted 1% both in profits and losses. Nobody represents the Lord in the partnership deed and only 4 partners signed the partnership deed. Nobody on behalf of the Deity signed the partnership deed. The Income-tax Officer held that the provisions of Section 184(3) of the Income-tax Act were contravened. The assessee by its letter dt. 13-2-85 sought to explain that the partnership was only among the 4 partners that it was decided by all the partners of the firm that 1% of the profits shall be allocated in the name of Lord Venkateswara which amount can be presented to the Tirupathi Devasthanam that under the provisions of Partnership Act, the deed was a valid one and therefore registration can be granted. However, the Income-tax Officer felt that since nobody signed on behalf of the Deity who figured as 5th partner and since no valid explanation was offered on behalf of the assessee to make up this deficiency, the Income-tax Officer felt that the assessee contravened the provisions of Section 184(3) and not entitled for grant of registration and he sought to obtain support for his refusal to grant of registration from two case laws Manohar Das Kedar Nath v. CIT[1950] 18 ITR 914 (All.), CIT v. Tapang Light Foundry & Co. [1983] 147 ITR 581/13 Taxman 127 (Cal.). The Income-tax Officer refused registration to the firm by his orders dated 4-2-1985.

(2.)Against those orders an appeal was filed before the Appellate Asst. Commissioner. The Appellate Asst. Commissioner reversed the decision of the Income-tax Officer and ordered grant of registration to the assessee-firm on the basis of the Karnataka High Court decision in the case of Bhagwanchand S. Jain & Co. v. Addl. CIT[1981] 127 ITR 770 (Kar.). The Appellate Asst. Commissioner held that the intention of the partners by making Lord Venkateswara, a partner of the firm is to create one per cent of the profits of the Devasthanam at Tirupati. In case of loss the same will be apportioned among the partners themselves and no amount will be allocated to the Devasthanam. Considering the facts of the case, the Appellate Asst. Commissioner held that he was constrained to hold that there was no defect in either the deed of partnership or in the application for registration in the absence of signature of 5th partner, Lord Venkateswara in either or both of them. The above omission, the Appellate Asst. Commissioner holds, does not entitle the Income-tax Officer to refuse registration of the firm.
As against the Appellate Asst. Commissioner's impugned order the revenue came up in second appeal before this Tribunal. According to the revenue, granting registration to the assessee-firm is clearly erroneous and invalid and Appellate Asst. Commissioner's order is liable to be set aside. The learned Departmental Representative took us through the partnership deed dated 19-3-80. He particularly referred to clause 8 of the partnership deed which deals with distribution of profits and losses of each of the 5 partners was already extracted in the above paras. It is clear that the 5th partner is stated as Lord Venkateswara, Tirupathi and His share both in profits and losses is stated to be 1%. The learned Departmental Representative contended that Sri Lord Venkateswara as a juristic person cannot act by Himself but can act only by a valid representative acting on His behalf. The valid representative of Sri Lord Venkateswara is Tirumala Tirupathi Devasthanam. However, T.T. Devasthanam did not represent the Deity while executing the impugned partnership deed dated 19-3-1980. Though there are 5 partners mentioned in the partnership deed only 4 partners signed in the partnership deed and the 5th partner Lord Venkateswara, Tirupathi did not sign the partnership deed. Form No. 11 which is the form to be signed by all the partners while applying for registration of the firm, was also signed only by 4 partners and nobody signed representing Sri Lord Venkateswara, the 5th partner. The Income-tax Officer in those circumstances is quite correct in holding that the provisions of Section 184(3) are contravened and hence the registration should be refused to the assessee-firm. The learned Departmental Representative further contended that if I am to accept that Sri Lord Venkateswara should be considered as partner of the assessee-firm then the repercussion would be too serious - Lord Venkateswara would be made liable for all the debts and liabilities of the firm and the assets of the Lord would be open to be proceeded against for the debts and liabilities of the firm. Under the provisions of the Partnership Act the liability of the partners is joint and several in view of the categorical provisions of Section 25 of the Partnership Act which is as follows : -

Liability of a partner for acts of the firm - Every partner is liable, jointly with all other partners and also severally for all acts of the firm done while he is a partner.

The learned Departmental Representative also submitted that Lord Venkateswara is not validly represented in the partnership deed ; the stipulatiops in the partnership deed themselves do not bind the 5th partner, Lord Venkateswata, Tirupathi. Ultimately it was argued by the learned Departmental Representative that the partnership is not valid, in view of the Calcutta High Court in Tapang Light Foundry & Co, 's case (supra).

(3.)SRI D.V. Anjaneyulu, learned counsel for the assessee argued that Section 184(3) is not at all applicable if we take pragmatic view of the whole affair. He also argued that the Calcutta High Court decision in Tapang Light Foundry & Co. 's case.(supra) is distinguishable. He contends that in the said decision the only question considered was whether a Hindu Deity is a juristic person or not. He also contends that SRI Lord Venkateswara is not a juristic person. The question of securing the signature of the deity in the partnership deed does not arise since the 5th partner cannot be considered to be a 'person' within the meaning of the Income-tax Act. He heavily relied upon the decision of the Karnataka High Court in Bhagwanchand S. Jain & Co. 's case (supra) and submitted that the facts of the said case are quite similar to the facts on hand and therefore, the impugned order of the Appellate Asst. Commissioner is not liable to be disturbed in my hands.


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