KAILASAM, J. - (1.) THE question that is referred for decision of this court is "Whether the refusal to grant registration to the firm under section 26A of the Act for the three assessment years 1958-59 to 1960-61 is not justified ?" *One Sreeranga Mudaliar commenced business in retail handloom cloth at Erode and was carrying it on in his individual capacity for about three years. In or about 1957, he took in certain other persons as partners and a partnership deed was duly executed on September 5, 1957, consisting of four partners and with a capital provided as under : (1) Sokkalingam Chettiar --- Rs. 5, 937-8-0, (2) Sethu Achi-Rs. 1, 562-8-0, (3) Sreeranga Mudaliar-Rs. 1, 250 and (4) R. S. Manickam-Rs. 1, 250. THE partnership deed consisted of various clauses which conferred overriding powers on the first partner. THE Appellate Assistant Commissioner refused registration on the ground that the partnership deed placed restrictions on the powers of the other partners and those restrictions reduced the other partners to the position of mere dummies. THE Income-tax Appellate Tribunal considered the restrictions placed on the other partners and found that those restrictions were not sufficient for refusing registration. We are therefore not concerned with those restrictionsTHE Income-tax Appellate Tribunal refused registration on the ground that there was no provision in the partnership deed entitling partners Nos. 3 and 4 to anything more than a share of the profits specified in the deed of the assessee-firm, and they acted contrary to the deed in paying partners Nos. 3 and 4 something over and above the shares of profits specified in the partnership deed in the guise of salary for which no provision was made in the partnership deed the profits of the business relating to the previous year were not divided in accordance with the terms of the partnership instrument.
(2.) THIS view of the Tribunal is now challenged before usSection 26A of the Income-tax Act prescribes the procedure for registration of firms. The application shall be made to the Income-tax Officer on behalf of any firm constituted under the instrument of partnership specifying the individual shares of the partners for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax. Section 26A(2) provides that the application shall be made in the manner prescribed by the Rules. According to rule 3 of the Income-tax Rules, 1922, the application shall be made in the form annexed to this rule and shall be accompanied by the original instrument of partnership under which the firm is constituted together with a copy thereof. It is not disputed that this rule was complied with. The officer, on receipt of the application, under rule 4, after satisfying himself that there is or was a firm in existence constituted as shown in the instrument of partnership deed and that the application had been properly made, may give a certificate of registration. If he is not so satisfied, he shall pass an order refusing to recognise the instrument of partnership. The requirements of the Rules are all satisfied when an application in the prescribed form is made along with the instrument of partnership. The only flaw that may be found in filling up the form is that in the Schedule to the form of application for registration there is a column in which the salary or commission of the partners has to be mentioned and this particular requirement was not fulfilled. But this will not be a reason for refusing to grant registration for it is incumbent on the officer to grant the certificate if he is satisfied that there was a firm in existence constituted as shown in the instrument of partnership and that the application was properly made. The finding of the Tribunal is not that there was no partnership or that the application was not properly made but that the profits were not correctly calculated as two of the partners were allowed to draw some amounts by way of salary. This, in our opinion, will not be a ground for refusing registration. The finding that the net profits of the firm are reduced cannot also be accepted, for the net profit can only be arrived at after deducting the salary given to the employees. The fact that two of the partners were discharging certain duties of employees will not make any difference. In the circumstances, our answer to the question is in favour of the assessee with costs. Counsel's fee Rs. 250 Question answered in favour of the assessee.;