- (1.) Miscellaneous Judicial Case No; 327 of 1957 : In this case it appears that one K. C. S. Reddy obtained a dealer's licence under the provisions of the Bihar Mica Act in 1948. For the assessment year 1950-51 he filed a return of his income from the business in mica in the status of an individual and the assessment was completed on, that basis. Subsequently the assessee made a claim that the business had been taken over by a firm consisting of himself and four others, namely (1) Adala Ramireddy of Nellore, (2) Bettepati Sub-bareddy of Nellore, (3) Veluru Saraswathama of Indupur, Kovur Taluk, and (4) Kotamreddi Chenchamma of Bodduvaripalem, Kovur Taluk. It was alleged that there was a partnership deed dated 15-8-1950, and registration of the firm was claimed on the basis of this partnership deed under Section 26A of the Indian Income-tax Act. The application for registration was rejected by the Income-tax Officer and assessment was made under Section 23(3) of the Income-tax Act on the basis that the firm was an unregistered firm. The matter, was taken up in appeal, but the Appellate Assistant Commissioner dismissed the appeal, holding that the assessee was carrying on mica dealing business without a dealer's licence in the name or the partnership and so there was contravention of the provisions of the Bihar Mica Act of 1947 and the business carried on by the assessee was unlawful. The Appellate Assistant Commissioner, therefore, upheld the order of the Income-tax Officer refusing the registration under Section 26A and also making the assessment in the status of an unregistered firm. The assessee appealed to the Income-tax Appellate Tribunal against both the orders of the Appellate Assistant Commissioner. The Tribunal allowed both the appeals, holding that the partnership was not unlawful and the application of the partnership for being registered should have been allowed under Section 26A of the Indian Income-tax Act. The Tribunal also set aside the quantum assessment of the firm on the basis that it was an unregistered firm.
(2.) As required by the Income-tax Department, the Income-tax Appellate Tribunal has submitted the following question of law for the opinion of the High Court under Section 66(1) of the Indian Income-tax Act: "Whether the partnership has been properly held to be valid and so entitled to registration?" On behalf of the Income-tax Department the Standing Counsel put forward the argument that the partnership firm was bound to take out a dealer's licence under the provisions of Section 4(1) (d) of the Bihar Mica Act, if the business of the partnership was to deal in mica, and in the absence of any such licence having been granted to the partner ship it must be held; that the object of the partner ship was unlawful and registration had been, rightly refused by the Income-tax authorities. We do not accept this argument as right. Section 4(1) (d) of the Bihar Mica Act is to the following effect. "4. (1) Save as provided in Sub-section (2) and Sub-section (3) of this section, no person shall: x x x x x (b) buy mica, or have in his possession or sell mica extracted in a controlled area from a mica mine or mica dump of which he is not in possession or, mica imported into a controlled area from any place not situated in a controlled area, except under and in accordance with a dealer's license;" A "dealer's license" has been defined by Section 2(e) of the Act as "a license granted under Section 6 authorising the person to whom it is granted to buy mica, and to have in his possession and sell mica, (i) extracted in a controlled area from a mica mine of which he is not in possession or from a mica dump; or (ii) imported into a controlled area from any place not situated in a controlled area". In our opinion, Section 4 (1) (d) does not require a partnership as such to take out a dealer's licence before carrying on the business of dealing in mica. The reason is that a partnership is not a person in the eye of law and the provisions enacted by Section 4 (1) (d) can not, therefore, apply to a partnership as such. This view is borne out by a decision of the Supreme Court in Dulichand Laxminarayan v. Commr. of Income-tax, Nagpur 1956-29 I. T. R. 535 : ((S) AIR 1956 SC 354) where it was pointed out by the Supreme Court that a firm is not a "person" and as such is not entitled to enter into a partnership with another firm or a Hindu undivided family or individual. It was pointed out in that case that the general concept of partnership which is formally established in both the English and the Indian systems of law is that a firm is not an entity or a person in law but is merely an association of individuals and a firm name is only a collective name of those individuals who constitute the firm, . In other words a firm name is merely an expression, only a compendious mode of designating the persons wild have agreed to carry on the business of partnership. According to the principles of English law which we have adopted in India for the purposes of determining legal rights "there is no such thing as a firm known to the law" as was said by James L.J. in Ex parte Corbett: In re Shand, (1880) 14 Ch. 122(126). We, therefore, reject the argument of the learned Standing Counsel on this part of the case and hold that a firm as such is not required to take out a dealer's licence under Section 4(1) (d) of the Bihar Mica Act, 1947.
(3.) It was next submitted by the learned Standing Counsel that Section 7 of the Act required that no person whose name is not endorsed on a dealer's licence or a proprietor's certificate shall be entitled to exercise on behalf of the licensee or a registered proprietor any of the powers conferred upon him under the Act or his licence or proprietor's certificate. It is the admitted position in this case that Mr. K.C.S. Reddy, who is one of the partners of the firm, is in possession of a dealer's licence, and under paragraph 6 of the partnership deed Mr. K. C. S. Reddy is the managing partner. If Mr. K. C. S. Reddy has the intention of delegating to the other partners of the firm, the power of selling or purchasing mica, it is undoubtedly open to him to apply to the Controller under the provisions of Section 7 of the statute for endorsing the names of the other partners on the licence. It is a matter of option for Mr. K. C. S. Reddy to apply for endorsement or not. If the other partners considered that it was sufficient that Mr. K. C. S. Reddy alone should purchase, sell or deal in mica, it was certainly open to them to say so, and there was no duty cast upon Mr. K. C. S. Reddy to get the names of the other partners endorsed on the licence, under the provisions of Section 7 of the statute. In our opinion there is no illegality committed in this case either by Mr. K. C. S. Reddy or by the other partners of the firm who have entered into the partnership. The important point to be noticed is that there is no express prohibition in the Bihar Mica Act that a partnership cannot carry on the business of dealing in mica, provided of course that the person who actually sells and who actually purchases and who actually is in possession of the mica has the dealer's licence required under Section 4(1) (d) of the Act. We, therefore, hold that the view taken by the Income-tax Appellate Tribunal in this case is legally correct and it must be held that the partnership is legally valid and is entitled to be registered under Section 26A of the Indian Income-tax Act. We accordingly answer the question of law referred to the High Court in favour of the assessee and against the Income-tax Department. There will be; no order as to costs.;