COSTELLO, J. - (1.) THIS matter comes before us under an order of this Court, dt. the 3rd July, 1934, made upon the application of a commercial firm carrying on business under the name of S. Lalchand. The CIT has submitted a case to the Court under the provisions of S. 66(3) of the IT Act.
(2.) THE questions of law which were formulated at the time when the Rule was made absolute arise out of an assessment made on S. Lalchand for the yr. 1932-33 on income arising in that tax year in the concern, as an unregistered firm carrying on business as jewellers and silk merchants in the Hogg Market and at Lindsay Street in this city, and also at Shillong and Cawnpur. The ITO has made an assessment for the year 1932-33 on a total income of Rs. 68,648, which income was reduced, on appeal to the Asstt. CIT, by a nominal amount without however, the Asstt. CIT, conceding the claim put forward by the assessee on the points which finally came before this Court. For some years prior to the tax year 1932-33, the ITO had allowed registration of the assessee under the provisions of S. 26A of the IT Act and the assessee was treated as a firm constituted in the following manner : The first three of the last four persons had two annas and five pies share each, and Bhagchand had 1 anna 9 pies share.
(3.) IN the year with which we are concerned, however, the ITO declined to renew the registration of these persons as a firm on the ground that the three first named persons were in themselves a firm and one firm in its corporate capacity could not be a partner in another firm. Consequently, there could not lawfully be a registration of that second firm, that is to say, the larger firm. As an authority for that proposition, the case of Jai Dayal Madan Gopal vs. CIT 6 ITC626 was relied upon.;