Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH,HYDERABAD
Vs.
RESPONDENT:
JAYALAKSHMI RICE AND OIL MILLS CONTRACTOR CO.
DATE OF JUDGMENT15/01/1971
BENCH:
GROVER, A.N.
BENCH:
GROVER, A.N.
SHAH, J.C.
HEGDE, K.S.
CITATION:
1971 AIR 1015 1971 SCR (3) 365
1971 SCC (1) 280
CITATOR INFO :
E 1984 SC 684 (34)
ACT:
Income-tax Act, 1922, s. 26A-Income-tax Rules, r.
2(b)--Indian Partnership Act, 1932, ss. 58, 59, 69-Rule 2(b)
providing that in respect of firms registered under
Partnership Act the application for registration of firm u/s
26A of the Income-tax Act shall be made before the end of
the previous year-Firm can be said to be registered under
Partnership Act nor on date of receipt of application under
ss. 58 but when entry is made in register of firms under s.
59-If such an entry is made after end of ’previous year’
firm is not registered under the Partners-ship Act for the
purpose of r. 2(b).
HEADNOTE:
The assessee firm was constituted under a deed of
partnership dated October 6, 1955. It was to come into
existence with effect from November 5, 1954. The assessee
filed an application under s. 26A of the Act for
registration of the firm for the assessment year 1956-57.
The previous year of the firm was shown as the year ending
October 26, 1955. The application was received by the
Income-tax Officer on October 14, 1955. On October 20, 1955
the assessee filed before the Registrar of Firms a statement
under s. 58 of the Indian Partnership Act, 1932. On
November 2, 1955 the Registrar of Firms filed the statement
of the assessee and made entries in the register of firms.
On March 23, 1961 the Income-tax Officer passed an order
refusing to register the firm under s. 26-6A. inter-alia for
the reason that the application had not been made in time.
The appeal taken to the Appellate Assistant Commissioner
failed. The Tribunal also upheld the order of the
authorities below. In reference the High Court answered the
question in favour of the assessee holding that the
partnership should be deemed to have been registered on the
date when the application was presented and that the
requirement of r. 2(b) of the Rules would be satisfied if it
became registered under the Partnership Act even after the
’application under s. 26A was filed. in appeal by the
Revenue.
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HELD : (i) The view taken by the High Court was not correct.
Under the Partnership law it can be taken to have been
settled by decision,-, of High Courts, from a long time that
the registration of firm takes place only when necessary
entries are made in the register of firms under s. 59 of the
Partnership Act by the Registrar. Section 58 of the Act no
doubt employs language which, without anything more may
appear to lend support to the view that the registration of
a firm may be effected merely by sending an application
which would mean that as soon as an application is sent and
if entry is made under s. 59 pursuant to it the registration
would be effective from the date when the application was
presented. But s. 58(2) is not to be read in isolation and
has to be considered along with the scheme of the other
provisions of the Act viz. ss. 59 and 69. The latter
section which deals with the effect of non-registration
throws light on what was contemplated by the Legislature
with regard to the point of time when the firm could be
regarded as registered. [368 C-G]
Ram Prasad v. Kamta Prasad, A.I.R. 1935 All. 898, Danmal
Parshomadas v. Baburam Chhotelal, I.L.R. [1936] 58 All. 495
and Kerala Road Lines Corporation v. Commissioner of Income-
tax, Kerala 51 I.T.R. 711, approved.
366
(ii) The views expressed by the Special Committee appointed
by the Government of India in respect of the Bill which came
to be passed by the Central Legislative as the Partnership
Act were irrelevant for the purpose of construing the
provisions of the Act. [1369B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 545 of
1967.
Appeal from the judgment and order dated April 15, 1966 of
the Andhra Pradesh High Court in Case Referred No. 40 of
1963.
S. C. Manchanda, B. D. Sharma and R. N. Sachthey, for
the .appellant.
K. Rajendra Chaudhuri, for the respondent.
The Judgment of the Court was delivered by
Grover, J. This is an appeal from a judgment of the Andhra
Pradesh High Court arising out of a reference made under S.
66(1) of the Income-tax Act, 1922, hereinafter called the
’Act’ of the question whether on the facts and in the
circumstances of the case the application under s. 26A of
the Act was filed out of time
The facts are not in dispute. The assessee firm was consti-
tuted under a deed of partnership dated October 6, 1955. It
was to come into existence with effect from November 5,
1954. The assessee filed an application under S. 26A of the
Act for registration of the firm for the assessment year
1956-57. The ’previous year’ of the firm was shown as the
year, ending October 26, 1955. This application was
received by the Income-tax Officer on October 14, 1955. On
October 20. 1955 the assessee filed before the Registrar of
Firms a statement under s. 58 of the Indian Partnership Act
1932. On November 2, 1955 the Registrar of Firms filed the
statement of the assessee and made entries in the registrar
of firms. On March 23, 1961 the Income-tax Officer passed
an order refusing to register the firm under s. 26A inter
alia, for the reason that the application had not been made
in time. The appeal taken to the Appellate Assistant
Commissioner by the assessee failed. The Income-tax
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Appellate Tribunal also upheld the order of the Income-tax
Officer and the Appellate Assistant Commissioner. On that a
reference was sought and the High Court answered the
question-referred in favour of the asses,see on the ground
that the application had been filed in time.
Section 26A of the Act provides that an application may be
made to the Income-tax Officer on behalf of any firm
constituted under an instrument of partnership specifying
the individual shares of the partners for registration for
the purposes of the Act. The application has to be made by
such person or persons and at such time and has to contain
such particulars etc. as may be
367
prescribed. Rules 2 to 6(b) of the Rules made under s. 59
of the Act deal with registration of firms. We are
concerned with the following material portion of Rule 2.
"Such application shall........ be ....
made ....
(a) Where the firm is not registered under
the Indian Partnership Act, 1932 (IX of 1932)
or or where the deed of Partnership is not
registered under the Indian Registration Act,
1908 (XVI of 1908), and the application for
registration is being made for the first time
under the Act,
(i) Within a period of six months of the
constitution of the firm or before the end of
the ’previous year’ of the firm whichever is
earlier, if the firm was constituted in that
previous year,
(ii) before the end of the previous year in
any other case;
(b) Where the firm is registered under the
Indian Partnership Act, 1932 (IX of 1.932) or
where the need of partnership is registered
under the Indian Registration Act (XVI of
1908) before, the end of the previous year of
the firm........"
Now it is common ground that the application for
registration was not made within the period prescribed by
rule 2(a). What has been urged throughout on behalf of the
assessee is that the application to the Income-tax Officer
was governed by rule 2(b) and was in time as the firm should
be deemed to have been registered not on the date on which
it was actually registered by the Registrar of Firms but
with effect from the date on which the application for
registration was presented to the Registrar. In other words
the firm should be considered to have been registered on
October 20, 1955 on which date the statement under s. 58 of
the Partnership Act was filed by the assessee before the
Registrar of Firms.
The real question which has to be determined is whether the
registration of a firm under the Partnership Act takes place
with effect from the date on which the application for
registration is made in accordance with s. 5 8 of that Act.
Section 5 8 ( 1 ) provides that the registration of a firm
may be effected at any time by sending by post or delivering
to the Registrar of the area in which any place of business
of the firm is situated or proposed to be situated a
statement in the prescribed form and accom-
368
panied by the prescribed fee stating........ Under S. 59
when the Registrar is satisfied that the provisions of S. 58
have been duly complied with he shall record an entry of the
statement in a registrar called the "register of firms’ and
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shall file the statement. In Ram Prasad v. Kamta Prasad(1)
it was laid down that the registration of a firm under the
Pertnership Act takes place only when the necessary entry is
made in the register of firms, Even under s. 69 of the
Partnership Act which deals with the effect of non-
registration it has been consistently held that the
registration of a firm subsequent to the filing of the suit
did not cure the defect; See Danmal Parshotamdas v. Baburam
Chhotelal(2). Thus under the Partnership law it can be
taken to have been settled by decisions of High Courts from
a long time that the registration of a firm takes place only
when the necessary entry is made in the register of firms
under s. 59 of the Partnership Act by the Registrar. It is
true that sub-section (1) of s. 58 employs language which
without anything more may land support to the view that the
registration of a firm may be effected merely by sending an
application which would mean that as soon as an application
is sent and if entry is made under s. 59 pursuant to it the
registration would be effective from the date when the
application was presented. But s. 58(1) is not to be read
in isolation and has to be considered along with the scheme
of the other provisions of the Act, namely, s. 59 and s. 69.
The latter section may not have a direct bearing on the
point under our consideration but it throws light on what
was contemplated by the legislature with regard to the point
of time when the firm could be regarded as registered. The
Kerala High Court has in Kerala Road Lines Corporation v.
Commissioner of Income-tax, Kerala(1), clearly expressed the
view that reading ss. 58 and 59 of the Indian Partnership
Act together a firm cannot be said to be registered when the
statement prescribed by s. 58 and the required fee are sent
to the Registrar and that the registration of the firm is
effected only when the ’entry of the statement is recorded
in the registrar of firms and the statement is field by the
Registrar as provided in s. 59. In that case also an
identically similar question arose in respect of
registration of a firm under s. 26A of the Income-tax Act.
The High Court in the judgment under appeal referred to the
statement extracted from the report of the Special Committee
which had been appointed by the Government of India to
examine the provisions of the Bill before it came to be
passed by the Central Legislature as the Partnership Act and
reference was made in particular to the statement relating
to clause 58 corresponding
(1) AIR[1935]Al1.898. (2) I.L.R.[1936] 58ALL.495.
(3) 51 I.T.R. 71 1.
369
to S. 59 of the Partnership Act to the effect that the
Registrar was a mere recording officer and that he had no
discretion but to record the entry in the registrar of
firms. We are unable to see how that statement, can be
taken into consideration for the purpose of interpreting the
relevant provisions of the Partnership Act.. We Also cannot
concur with the other reasoning of the High Court for coming
to the conclusion that the partnership should be deemed to
have been registered on the date when the application was,
presented and that the requirement of rule 2(b) would be
satisfied if it became registered under the Partnership Act
even after the: application was filed.
For the reasons given above the appeal is allowed and the
judgment of the High Court is set aside. The answer to the
question referred must be given in the affirmative and
against the, assessee. The appellant shall be entitled to
costs in this Court.
G.C. Appeal
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allowed’.
10-L807Sup. CI/71
370