- (1.) THIS is a reference under Section 66 (2) of the Indian Income-tax Act, 1922, and was made at the instance of Messrs. Mohan Lal Shyam Lal of Benaras. The assessment year is 1938-39. It has been conceded in the course of argument that the Income-tax Act of 1922 before the amendment by the Act of 1939 will govern the present reference.
(2.) THERE was a man by the name of Lala Shyam Lal whose fathers name was Mohan Lal. Shyam Lal had two wives. One was Mst. Muni and from this union there were two sons, Kanhiaya Lal and Kishen Das. The second wife was Mst. Shyam Kumari and from this union there were two sons, Basant Lal and Gobind Prasad. His business, consisted of Benares cloth, gold and silver thread and money-lending. The assessee Messrs. Mohan Lal and Shyam Lal were always assessed as an "association of individuals". An attempt was made in the year 1934-35 for the assessment being made as an unregistered firm, but the application was withdrawn and in that assessment year also Messrs. Mohan Lal and Sayam Lal were assessed as an "association of individuals". During the assessment year 1938-39 some time about September 1938 an application was made by Baij Nath Das on behalf of Messrs. Mohan Lal Shyam Lal under Section 26-A of the Act for registration for purpose of the Act. Section 26-A runs as follows : "Application may be made to the Income-tax Officer on behalf of any firm, constituted under an instrument of partnership specifying the individual shares of the partners, for registration for the purpose of this Act and any other enactment for the time being in force relating to income-tax or super-tax". The pre-requisites of a successful application under Section 26-A are the existence of a firm and an instrument of partnership. The firm further must have been constituted under an instrument of partnership. The Income-tax Officer on the 21st of September 1938 rejected the petition holding that there was no firm and no need of partnership and there could, therefore, be no question of allowing registration under Section 26-A of the Income-tax Act. He then said that the assessee would be treated as an association of individuals last year and would be assessed as such. After the assessment there was an appeal to the Assistant Commissioner from the assessment order and that appeal was dismissed on the 11th of November 1938 by means of a short order but reference was made to a previous order dated the 2nd of December 1937 where detailed reasons are given.
(3.) THERE was a combined application under Section 33 and Section 66 (2) of the Act to the Commissioner. The Commissioner refused to give any relief under Section 33, but under Section 66 (2) of the Act he has prepared a statement of the case and has referred for our decision the following question of law :- "Whether, in the circumstances of this case, the Income-tax Officer was correct in law in rejecting the application for the registration of the firm under Section 26-A of the Act? " We have already given the language of Section 26-A and said that there must be a firm constituted under an instrument of partnership before an application under Section 26-A can succeed. The terms "firm" and "partnership" as not defined in the Income-tax Act, but in Section 2 (6A) it is said "firm", "partner" and "partnership" have have the same meanings respectively as in the Indian Contract Act, 1872. Although Chapter XI of the Indian Contract Act of 1872 was repealed by the Indian Partnership Act of 1932, but the words in Section 2 (6A0 of the Indian Income-tax Act were not latered, and it has again been conceded before us that for the definition of these expression "firm", "partner" and "partnership" we have to look not to the Indian Parnership Act but to the Indian Contract Act, It is only by the Amending Act of 1939 that it has been made clear that the terms "firm", "partner" and "partnership" will have the same meanings respectively as in the Indian Partnership Act of 1932. Section 239 of the Indian Contract Act was as follows :- " Partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business, and to share the profits thereof between them. Person who have entered into partnership with one another are called collectively a firm". ;