- (1.) THIS is a reference made by the Income-tax Appellate Tribunal, Delhi Bench, by their order dated 17-2-1953, referring to this Court for opinion the following question: "whether a firm which is alleged to have come into existence by a verbal agreement in June 1944 is entitled to be registered under Section 26a for the purpose of the assessment for 1949-50, where the Instrument of Partnership was drawn up only in May, 1949, after the expiry o the relevant previous year?"
(2.) THE case relates to the accounting year 1948-49 and assessment year 1949-50. The assessee firm alleges that it was brought into existence in June 1944 with three persons as partners between whom there was no written deed of partnership drawn up. On 9-5-1949, a written deed of partnership was executed between the partners which is printed at page 4 of the paper-book. This instrument of partnership recites that two partners, Nauhria Singh and Ram Singh, started it in the year 1912 and in 1938 another partner Chanan Singh was taken into partnership and on the death of Ram Singh, Gurdial Singh his son became a partner; the shares of the partners remaining the same, only Gurdial Singh took the place of Ram Singh. This partnership deed provides : ". . . . . The parties. . . . . mutually covenant and agree to continue as partners in the said business upon and subject to the terms and conditions stated below. . . . .
(3.) THAT the partnership business shall be deemed to have commenced in the present constitution on 23-6-44. 7. That a statement of assets and liabilities of the partnership business as ending on 31-3-49 has been drawn up and the credits to the capital accounts of the parties hereto are accepted and confirmed. 11. That the parties hereof will be entitled to the following salaries with effect from 1-4-49 which will be debitable to the Profit and Loss account of the partnership business: 1. S. Nauhria Singh. Rs. 300/- p. m. 2. S. Gurdial Singh. Rs. 200/- p. m. 3. S. Chanan Singh. Rs. 250/- p. m. . . . . . . . . . " this document was registered before the Joint Sub-Registrar on 26-8-1949. 3. During the assessment year 1949-50, the firm applied to the Income-tax Officer for registration of the firm under Section 26a, Income-lax Act, for the purpose of assessment of the accounting year 1949-50. This was rejected by the Income-tax Officer and ultimately by the income-tax Appellate Tribunal who held that as the partnership had come into existence by an oral agreement in June 1944 and the instrument of partnership was not executed till May 1949, i. e. after the year of the account relevant for the assessment year 1949-50, the assessee firm was not entitled to get the registration effected under Section 26a, Income-tax Act.;