- (1.) THIS is a reference under Section 66(1) of the Indian Income-tax Act, and three questions have been referred to us for answer. The questions are as follows :- (1) Whether on the true construction of the deed of partnership, dated 15th September, 1932, Krishna Murari was admitted as a partner of the firm or was he admitted to the benefits of partnership ? (2) If Krishna Murari was admitted as a partner, could such a deed of partnership be registered under Section 26A of the Indian Income-tax Act, 1922, and the rules made under the Act ? and (3) Whether the application dated 23rd July, 1943, was in order regard being had to Rules 2-6B of the Indian Income-tax Rules, 1922 ?
(2.) THE facts briefly are that Gajadhar Ram and Benarsi Lal were cousins. Gajadhar Ram had two sons, Sundar Mal and Jagdish Prasad. Sundar Mal is dead and his widow had adopted Krishna Murari, son of Jagdish Prasad. Gajadhar Ram, Benarsi Lal, Jagdish Prasad and Krishna Murari were members of a joint Hindu family, and on the 15th September, 1932, there was a partition between them and a deed of partition was executed. On the 15th October, 1932, they purported to enter into a partnership, each of them being given a four annas share. We have read the document carefully. The document fails to take into account the fact that Krishna Murari was a minor and the document purports to be an agreement between the minor and the three adult persons to enter into a partnership with equal rights and obligations. In paragraph 1 of this document it was agreed that the partnership was to continue until the lifetime of the partners unless it was previously terminated by mutual consent. In the next paragraph it was provided that on the death of any of the partners it was open to the remaining partners to agree to admit the legal representatives of the deceased partner into the partnership and continue the business as before. On the 24th January, 1943, Krishna Murari died. Who was his legal representatives was not very clear from the facts, and learned counsel for the assessee in his argument assumed that Jagdish Prasad, his natural father, was his legal representative. It is now clear, however, from certain other documents that Krishna Murari was adopted by Sundar Mals widow after the death of Sundar Mal and on the death of Krishna Murari, his adoptive mother, became his legal representative. From 1934-35 to 1940-41 the firm was assessed as a registered firm and the registration was renewed from year to year. It appears that it was not noticed by the Income-tax Officer that Krishna Murari was a minor, or if it was noticed by him he might have thought that it was a valid partnership. On the 26th July, 1943, an application under Section 26A for renewal of the partnership for the year 1942-43 was filled under the signatures of Gajadhar Ram, Benarsi Lal and Jagdish Prasad. Jagdish Prasad purported to sign for Krishna Murari deceased also. The application was dismissed by the Income-tax Officer on the 15th September, 1943. There was an appeal to the Assistant Commissioner who dismissed the appeal on the 13th January, 1945, and a further appeal to the Appellate Tribunal also failed. The Appellate Tribunal was of the opinion that the certificate given in the application under Section 26A that the constitution of the firm and the individual shares of the partners had remained unaltered was incorrect, that one partner having died and this application having been made only by Gajadhar Ram, Benarsi Lal and Jagdish Prasad, Krishna Murari being dead, the constitution of the firm had been altered and that there could be no valid partnership between a minor and the adult members.
(3.) AN application was thereupon field on behalf of the assessee to refer certain questions of law to this Court for its opinion. The Tribunal referred the three questions which we have mentioned above. Coming to the first question whether on the true construction of the deed of partnership, dated 15th September, 1932, Krishna Murari was admitted as a partner of the firm or was he admitted to the benefits of partnership, it is clear enough that the three adult members purported to ignore the fact that Krishna Murari was a minor. For all intents and purposes they dealt with him as if he was a major, and the operative part of the document, which is very important, is in these terms :- ...... the first, second, third and fourth parts do and each of them both hereby declare and mutually covenant and agree to become partners in the business of commission agency and merchandise subject to the terms and conditions and stipulations hereto following..... ;