Full Judgment Text
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PETITIONER:
SHERE PUNJAB SILK STORES, DELHI
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX, DELHI
DATE OF JUDGMENT11/12/1972
BENCH:
HEGDE, K.S.
BENCH:
HEGDE, K.S.
REDDY, P. JAGANMOHAN
CITATION:
1973 AIR 2401 1973 SCR (3) 76
1973 SCC (4) 206
ACT:
Income Tax Act (11 of 1922) s. 26 A and Income Tax Rules,
1922 rr. 2, 3 and 6-Application for renewal of registration-
Division of previous year’s profits-If incumbent before
application is made.
HEADNOTE:
The assessee firm applied for renewal of its registration
under s.26A, Income Tax Act, 1922, in May 1958, stating that
the income of the previous year, which ended on March 31,
1958, had been divided among the partners. The Department
Tribunal and the High Court did not believe that the
previous year’s income had been divided and rejected the
application.
Dismissing the appeal to this Court,
HELD : From a reading of the section and rules 2, 3 and 6 of
the In,come tax Rules and the forms prescribed, it is clear
that in the case of an application for renewal, it is
incumbent on the part of the assessee to have divided the
previous year’s profits before the application for renewal
is made. The fact that the interpretation may cause
hardship to the assessee is irrelevant when the language is
plain. [81-G]
Surajmal v. Commissioner of Income-tax, Madras, 43 I.T.R.
491 and Ganesh Lal Laxmi Narain v. Commissioner of Income
Tax, U.P. 68 I.T.R., 696, approved.
Khanjan Lal Sewak Ram v. Commissioner of Income-tax, U.P.,
83 I.T.R. 175, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1690 of 1969.
Appeal by special leave from the judgment and order dated
July 15, 1968 of the Delhi High Court at New Delhi in
Incometax Reference No. 44 of 1964.
G.C. Sharma, R. Chawla, S. R. Gupta, R. P. Soni and K. B.
Rohtagi for the appellant.
F. S. Nariman, Addl. Solicitor-General of India, A. N.
Kirpal,
S. P. Nayar and R.N. Sachthey for the respondent.
The Judgment of the Court was delivered by
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HEGDE, J. This is an appeal by special leave. The appellant
is the assesssee. In this case we are concerned with his
assessment for the assessment year 1958-59. The relevant
previous year ended on March 31, 1958. The assesses firm
applied for renewal of its registration under section 26(A)
of the Indian Income Tax Act 1922 (in short ’the Act’)
before the Income-Tax Officer on May 26, 1958. In that
application he mentioned that the previous years’ income had
been divided among the partners. The Income-Tax Officer
rejected that application. He did not believe the version
of the assessee that the previous years’ income
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had been divided. In appeal, the Appellate Assistant
Commissioner agreed with the conclusion reached by the
Income-tax Officer. On a further appeal being taken to the
Income-tax Appellate Tribunal the Tribunal agreed with the
conclusions reached by the lower authorities. Before the
Tribunal yet another contention appears to have been taken.
That contention was that at any rate the partners having
divided the income of the previous year as evidenced by the
balance sheet before the assessment Was made, the assessee
firm was entitled for its registration under section 26(A).
The Tribunal did not go into that question. The High Court
agreed with the view taken by the Tribunal.
The only question that arises for decision in this case is
whether it was incumbent on the part of the assessee to have
divided the profits of the previous year before it made its
application for renewal of the registration certificate.
For deciding this question it is necessary to refer to the
relevant provisions of the Act as well as the Rules.
Section 26 (A) of the Act reads. thus.-
"26A. Procedure in registration of firms
(1) 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 this Act and
of any other enactment for the time being in force relating
to income-tax or super tax.
(2) The application shall be made by such person or
persons, and at such times and small contain such
particulars and shall be in such form, and be verified in
such manner, as may be prescribed; and it shall be dealt
with by the income-tax Officer in such manner as may be
prescribed."
Turning to the relevant Rules, they are found in Rules 2, 3
and 6. These Rules read thus:--
"Rule 2-Any firm constituted under an Instrument of
Partnership specifying the individual shares of the partners
may, under the provisions of section 26A of the Indian
Income-tax Act, 1922 (hereinafter in these rules referred to
as the Act), register with the Incometax Officer, the
particulars contained in the said Instrument on application
made in this behalf.
Such application shall be signed by all the partners (not
being minors) personally, or in the case of a dis-
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solved firm by all persons (not being minors) who were
partners in the firm immediately before dissolution and by
the legal representative of any such partner who is deceased
and shall, for any year of assessment UP to and including
the, assessment for the year ending on the 31st day of
March, 1953, be made before the 28th February, 1953, and for
any year of assessment subsequent thereto, be made.
(a)Where the firm is not registered under the Indian
Partnership Act 1932 (TX of 1932), or where the deed of
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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 (TX of 1932), or where the deed of
partnership is registered under the Indian Registration Act,
1908 (XVI of 1908), before the end of the previous year of
the firm, and
(c)where the application is for renewal of registration
under Rule 6 for any year, before the 30th day of June of
that year :
Provided that the, Income-tax Officer may entertain an
application made after the expiry of the time-limit
specified in this rule, if he is satisfied that the firm was
prevented by sufficient cause from making the application
within the specified time .
Rule 3-The application referred to in Rule 2 shall be made
in the form annexed to this rule and shall be accompanied by
the original Instrument of Partnership under which the firm
is constituted, together with a copy thereof : provided that
if the Income-tax Officer is satisfied that for some
sufficient reason the original Instrument cannot
conveniently be produced, be may accept a copy of it
certified in writing by all the partners (not being minors)
or, where the application is made after dissolution of the
firm, by all the persons
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referred to in the said Rule, to be correct copy, and in
such a case the application shall be accompanied by a
duplicate copy.
FORM I
FORM OF APPLICATION FOR REGISTRATION OF A FIRM UNDER SECTION
26A OF THE INDIAN INCOME-TAX ACT, 1922.
TO
The Income-tax Officer,
Dated 19
Income-tax year 19 19
1. ................
2...............
3.We do hereby certify that the profits (or loss if any-)
of the previous year were/will be (period upto the date of
dissolution were/will be) divided or credited as shown in
section B of the Schedule and that the information given
above and in the attached Schedule is correct.
(Signatures)
(Address)
Note :-This application must be signed..............
SCHEDULE
Name of Address Date of (1) (1) (2)
partner admitt-Interest Salaryor Share in
REMARKS
ance to on capital commis- the bal
partner or loans sion from ance of
ship. (if any) firm profits
(or loss)
etc.
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1 2 3 4 5 6 7
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(A)Particulars of the firm as constituted at the date of
this application.
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(B) Particulars of the apportionment of the income, profits
or gains (or loss) of the business, profession or vocation
in the previous year between the partners who in that
previous year were, entitled to share in such income,
profits or gains (or loss). Applicable where the
application is made after the end of the relevant previous
year).
------------------------------------------------------
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Note:-(I) If the interest, salary and/or
commission ............................................
column with the letter "R". (In other cases the
interest, salary and/or commissionmay exceed the total
profits so as to leave a balance of net loss divisible in
column 6).
----------------------------------------------------
(2)If any partner is entitled to share in profits but is
not liable to bear a similar proportion of any losses this
fact should be indicated by putting against his share in
column 6 the letter "P".
Rule 6 Any firm to whom a certificate of registration has
been granted under Rule 4 may apply to the Income-tax
Officer to have the certificate of registration renewed for
a subsequent year. Such application shall be signed
personally by all the partners (not being minors) of the
firm or, where the application is made after dissolution of
the firm, by all persons (not being minors) who were
partners in the firm immediately before dissolution and by
the legal representative of any such person who is deceased,
and accompanied by a certificate in the form set out below.
The application shall be made before the 30th day of June of
the year for which assessment is to be made provided that
the Income-tax Officer may entertain an application made
after the expiry of the said date, if he is satisfied that
the firm was prevented by sufficient cause from making the
application before that date.
FORM OF APPLICATION FOR THE RENEWAL OF REGISTRATION OF A
FIRM LTNDER SECTION 26A OF THE INDIAN INCOME-TAX ACT, 1922
TO
The Income-tax Officer
Dated 19
Assessment for the Income-tax Year 19 /19
1..................
2.................
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3.We do hereby further certify that the profits (or loss
if any) of the previous year were/period up to the date of
dissolution were/will be divided or credited as shown
below:-
Particulars of the apportionment of the income, profits or
gains (or loss) of the business, profession or vocation in
the previous year or the period upto the date of dissolution
between the partners who were entitled to share in such
income, profits or gains (or. loss).
Name of Address Date of (1) (1) (2)
Partner admitt- Interest Salary Share
ance of on capital or comm- in the REMARKS
partner- or loans ission balance
ship (if any) from of profits
firm. (or loss)
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etc. etc.
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1 2 3 4 5 6 7
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Note :-(1) If the interest, salary and/or............
loss divisible in column 6.
(2) If any partner is entitled ........ his share in column
6 the
letter "P".
(Signatures)
(Address)
Note :-This application must be signed personally ...... of
any such person who is deceased".
From a reading of these provisions it is clear that in the
case of an application for renewal it is incumbent on the
part of the assessee to have divided the previous year’s
profits. This conclusion appears to be obvious from Section
26(A) read with Rules 2, 3, 6 and the forms set out earlier.
The contention’ of Mr. Sharma, the learned counsel for the
assessee, that if the relevant provisions are interpreted in
the manner that we have done it leads to hardship to the
assessee, is not relevant in view of the plain language of
the provisions.
Our conclusion in this regard receives support from the
decision of Madras High Court in Surajmall v. Commissioner
of,
L63lSuP Cl/73
82
Income-tax, Madras(1), and that of the Allahabad High Court
in Ganesh Lal Laxmi Narain v. Commissioner of Income-tax,
U.P.(2). In Khanjan Lal Sewak Ram v. Commissioner of Income-
tax, U.P.(3) this Court had ruled that para 3 of Rule 6
(supra) is mandatory. We see no merit in this appeal. It
is dismissed with costs.
V.P.S. Appeal dismissed.
(1) 43 I.T.R. 491.
(2) 68 I.T.R. 696.
(3) 83 I.T.R. 175.
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