Sabyasachi Mukharji, J. - (1.) In the instant reference the following questions have been referred to us for answer : " 1. Whether, on the facts and in the circumstances of the case, and on a correct interpretation of the instrument dated 6th June, 1964, the Tribunal was correct in holding that the Hindu deity is a juristic person capable of entering into partnership and as such there was a valid partnership which was entitled to registration ?
(2.) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that it was the shebaits who have become the partners in the firm on behalf of the deities." 2. In order to appreciate the questions it is necessary to state that the questions arise out of a reference made under Section 256(1) of the I.T. Act, 1961, for the assessment year 1965-66. The assessee is a firm consisting of seven partners which was constituted on the strength of a partnership deed executed on 6th of June, 1964. It had filed an application for registration in Form No. 11 of the I.T. Rules. It also satisfied all other necessary conditions for a valid partnership. But the ITO was not satisfied with regard to the validity of the partnership because out of seven partners two were Hindu deities--Netai Gourji (by shebait Lingaraj Paikara) and Broja Ballav Jew (by shebait Lingaraj Paikara). According to the ITO, Hindu deities were " perpetually infant " and they could not enter into partnership. He, accordingly, refused registration to the assessee-firm. In order to appreciate this order, it would be necessary to refer to the relevant clauses of the partnership deed, which is dated 6th June, 1964. This deed is between seven contracting parties, of which two, as we have mentioned before, were Hindu deities, namely, Sri Sri Netai Gourji represented by Shebait Lingaraj Paikara of the Sixth Part and Sri Sri Broja Ballav Jew represented by Shebait Lingaraj Paikara of the seventh part. The partnership deed set out the history and, thereafter, continued to state that the parties had been continuing and were carrying on the business of iron foundry and contractors and order suppliers under the firm name of " Tapang Light Foundry & Co. "in co-partnership together as from 4th April, 1964, after the expulsion of one Raghunath Chotteray and then further states that the head office should be at Belur, Howrah. The partnership deed, inter alia, provided as follows : " 4. That the capital of the firm shall be the amounts standing to the credit of each partner in the capital account of the books of the firm as on the 4th day of April, 1964. 5. That the net profit and loss of the business shall be divisible amongst the partners in the proportion as under : JUDGEMENT_581_ITR147_1984Html1.htm 9. That if it becomes expedient for the purpose of the business of the said Lingaraj Paikara, the party hereto of the First Part shall be at liberty to borrow money for the purpose of the business with or without security of the assets of the partnership and for such borrowing the whole of the partnership shall be bound and liable. 11. That the assets of the partnership business shall be the assets of the firm and no partner shall have any right title or interest in whole or in part thereof save and except as is provided under the Indian Partnership Act. 18. That the share of the partners of the partnership business cannot be attached but provisions as regards retirement will follow if any attachment is made on the share of any partner due to his individual debt. 19. That all partners shall faithfully look to the interest of the business of the partnership and if any overt act is done by any of the partners to the detriment of the partnership business, he shall be ousted or expelled from the partnership and the provision as regards retirement shall apply in that case. 20. That no partner shall transfer by sale or by mortgage or in any other way charge his share of the firm or any part thereof except to his legal heirs."
(3.) The assessee felt aggrieved by the assessment order and took the matter up to the AAC who, after considering the factual as well as legal positions, came to the conclusion that the firm was entitled to registration. He held that the idol is an infant, and not sui juris and, according to him, when Hindu deities were capable of holding extensive properties they could also become partners in firms. He accordingly allowed the appeal of the assessee.;