Appeal No 700 of 1963
Appeal by special leave from the judgment and order dated January 11 1961 of the Madras High Court in Case Referred No 131 of 1956
21 H N Sanyal Solicitor General N D Karkhanis and R N Sachthei for the appellant
K Srinivasan and R Gopalakrishnan for the respondent
April 29 1964
The judgment of SUBBA RAO AND SIKRI JJ
was delivered by SUBBA RAO J SHAH J delivered a dissenting opinion
SUBBA RAO J
This appeal by special leave is directed against the order of the High Court of Madras in a reference made to it by the Income tax Appellate Tribunal under section 662 of the Indian Income tax Act 1922 hereinafter called the Act
The facts that have given rise to the appeal may briefly be stated
There are 5 firms in Sivakasi manufacturing matches under the name and style of Shenbagam Match Works Brilliant Match Works Manoranjitha Match Works Pioneer Match Works and Gnanam Match Works
The total number of the partners of all the 5 firms does not exceed 1 0 or II in number
Rajamoney Nadar is the sole proprietor of Shenbagain Match Works and in the other 4 firms there are more than one partner
In the year 1948 a person from each of those firms in his representative capacity formed a partnership to carry on the business of banking and commission agents the principal business being the marketing of the products of the different match factories in Sivakasi
When the said partnership applied for registration for the assessment year 1949 50 it was refused by the Income tax Department on the ground that different firms could not constitute a valid partnership
Thereafter Sankaralinga Nadar Arumughaswami Nadar Arunachala Nadar Palaniswamy Nadar and Rajamoney Nadar the first four being one of the partners of their respective firms and the last being the sole proprietor of his firm in their individual capacity entered into a part nership for the aforesaid purpose and executed a partnership deed dated April 1 1950
They presented the said deed of partnership to the Income tax Officer for registration
The Income tax Officer by his order dated October 27 1952 re gistered the same under section 26A of the Act but the Commissioner of Income tax under s33B of the Act cancell 22 ed the registration by an order dated October 23 1954 and directed the assessment to take place as that of an unregis tered firm
On appeal the Income tax Appellate Tribunal held on a construction of the partnership deed and also on the basis of some other circumstances that the said deed is not genuine and brought into existence only as a simulate arrangement that the profits which are distributed under the deed to the individuals mentioned therein are not the true profits of those individuals In short it held that the said partnership deed was not a genuine one
On a reference made to the High Court of Judicature at Madras a Division Bench of that High Court on a construction of the document came to the conclusion that the Match Works were not the real parties to the partnership but the parties of the document were the real partners
Hence the present appeal
Learned counsel for the Revenue raises before us the fol lowing two points namely i the findings of the Appellate Tribunal was one of fact and that the High Court had no jurisdiction to canvass the correctness of its finding on a reference made under section 662 of the Act and ii the con clusion arrived at by the Tribunal was the correct one and the High Court erroneously interfered with it
It is common place that under section 662 of the Act a reference to the High Court lies only on a question of law
The scope of the provision has been elaborately considered by this Court in Sree Meenakshi Mills Ltd vs Commissioner of income tax Madras 
Therein the scope of the provision has been laid down under different propositions
On the basis of the judgment it cannot be gainsaid that if the order refusing registration goes beyond the scope of the jurisdiction conferred on the Income tax Officer under section 26A of the Act and the Rules made thereunder or if the decision depends upon the construction of the partnership deed or if there is no evidence to sustain the finding of the Tribunal then the High Court will have jurisdiction to entertain the reference under section 662 of the Act
In our view the finding of the Tribunal falls squarelv under the said three heads
The relevant provisions of the Act read thus 1  23 Section 26A 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 shall 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
In exercise of the powers conferred by section 59 of the Act the Central Board of Revenue made the following rules 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 Income tax Officer the particulars contained in the said Instrument on application made in this behalf
Such application shall be given by all the partners not being minors personally and shall be made a before the income of the firm is assessed for any year under Section 23 of the Act or 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 24 FORM I For of Application for Registration of a Firm tinder section 26A of the Indian Income tax Act 1922 Rule 4
If on receipt of the application referred to in Rule 3 the Income tax Officer is satisfied that there is or was a firm in existence constituted is shown in the instrument of partnership and that the application has been properly made lie shall enter in writing at the foot of the instrument or certified copy as the case may be a certificate in the following form namely 
Rule 6B
In the event of the Income tax Officer bein satisfied that the certificate granted under Rule 4 or under Rule 6A has been obtained without there being a genuine firm in existence he may cancel the certificate so granted
A combined effect of section 26A of the Act and the rules made thereunder is that if the application made by a firm gives the necessary particulars prescribed by the rules the Income tax Officer cannot reject it if there is a firm in existence as shown in the instrument of partnership
A firm may be said to be not in existence if it is a bogus or not a genuine one or if in law the constitution of the partnership is void
The jurisdiction of the Income tax Officer is therefore confined to the ascertain I ing of two facts namely i whether the application for registration is in conformity with the rules made under the Act and ii whether the firm shown in the document pre sented for registration is a bogus one or has no legal existence
Further the discretion conferred on him under section 26A is a judicial one and he cannot refuse to register a firm on mere speculation
but he shall base his conclusion on relevant evidence
What are the facts in the present case The partnership deed is dated April 1 1950
In the document five persons are shown as its partners
The name of the firm is given the 25 objects of the partnership business are described the dura tion of the business is prescribed and the capital fixed is divided between them in equal share
Clause 16 of the Partnership deed on which the Tribunal relied reads This firm shall collect a commission of half an anna per gross on the entire production of the match factories of the partners respectively the Brilliant Match Works Manoranjitha Match Works Pioneer Match Works Shenbagam Match Works and Gnanam Match Works produced from 1st April 1950 whether sales were effected through this firm or not and a further commission of half an anna per gross on the sales effected through this firm
This commission will be collected on all kinds of matches produced from the abovesaid factories
The commission of half an anna per gross on the entire production of these factories accrued due at the end of every month shall be debited to the respective factories under advice to them
 Clauses 22 and 23 which throw further light on the question raised read Clause 22
The business of this firm shall have and has no connection with the match manufacturing business carried on now by the partners separately or in partnership with others
Clause 23
Any loss to the firm by way of fire accident or by any other cause during the course of the business of the firm notwithstanding the fact that the loss might have arisen on the sale of or transaction relating to the match manufacturing concerns of the partners to this deed shall be borne by this firm and shall be equally divided between the partners to this deed
It is not disputed that the partnership deed ex facie conforms to the requirements of the law of partnership as well as the Income tax Act
Under s4 of the Indian Partnership Act partnership is the relation between persons who have agreed 26 to share the profits of the business carried on by all or any of them acting for all persons who have entered into the partnership with one another called individually partners and collectively a firm and the name under which the business is carried on is called the firm name
The document certainly conforms to the said definition
There is also no prohibition under the Partnership Act against a partner or partners of otherfirms combining together to form a separate partnership to carry on a different business
The fact that such a partner or partners entered into a sub partnership
with others in respect of their share does not detract from the validity of the partnership nor the manner in which the said partner deals with the share of his profits is of any relevance to the question of the validity of the partnership
The document therefore embodies a valid partnership entered into in conformity with the law of partnership
But the Tribunal has held that the partnership is not a genuine one for the following reasons i previously the firm entered into a partnership but the registration of the same was rejected ii under cl
16 of the partnership deed the firm has the right to collect the commission of the entire match production of the larger partnerships whether they effect their sales through the firm or not iii the books of Gnanam Match Works show unmistakably that the capital was contributed not by Palaniswamy Nadar in his individual capacity but by the larger firm as such and iv regarding the other three larger firms also the profit delivered by their representatives from the assessee firm was divided amongst all the partners according to their profit sharing ratio in the larger firms
On the other hand the High Court found on a construction of the relevant clauses of the partnership deed that the business was the business of the partners of the firm alone and that the two circumstances relied upon by the Tribunal were irrelevant in acertaining whether the said partnership was real or not
We have already pointed out that the document ex facie discloses a valid partnership
The partnership was avowedly entered into by the partners in their individual capacity as their previous partnership in their representative capacity was not registered on the ground that such a part 27 nership was illegal
If the larger firms cannot constitute members of a new partnership some of the partners of those firms can certainly enter into a partnership shedding their representative capacity if they can legally do so
If they can do so the mere fact that one of them borrowed the capital from a parent firm we are using this expression for convenience of reference or some of them surrendered their profits to the parent firm cannot make it anytheless a genuine firm
Nor does cl 16 of the partnership deed detract from its genuineness that clause does not create any right in the partnership to collect the commission in view of the close Connection between the assessee firm and the parent firms the parent firms were expected to effect all their sales through the assessee firm
If they did not and if they refused to pay commission the assessee firm could not enforce its right under the said clause
Clause 22 in express terms emphasizes the separate identities of the assessee firm and the parent firms and cl 23 declares that notwithstanding the fact that the loss to the assessee firm has arisen on the sale or transaction relating to the match manufacturing concerns the assessee firm alone shall bear the loss and thereby indicates that the loss of the assessee firm will not be borne by the parent firms
If the assessee firm has a separate legal existence the two circumstances relied upon by the Tribunal namely that Palaniswamy Nadar one of the partners of the assessee firm brought in the capital from his parent firm or that the profits earned by some of the partners were surrendered to the parent firms would be irrelevant
A partner of a firm can certainly secure his capital from any source or surrender his profits to his sub partner or any other person
Those facts cannot conceivably convert a valid partnership into a bogus one
The Tribunal mixed up the two concepts viz the legality of the partnership and the ultimate destination of the partners  profits
It also mixed up the question of the validity of the partnership and the object of the individual partners in entering into the partnership
If to avoid a legal difficulty 5 individuals though four of them are members of different firms enter into a partnership expressly to comply With a provision of law we do not see any question of fraud 28 or genuineness involved
It is a genuine document and it complies with the requirements of law
It is not an attempt to evade tax but a legal device to reduce its tax liability
The fact that all the partners of all the firms did not exceed 12 in number and if they chose all of them could have entered into the partnership indicates that there was no sinister inotive behind the partnership
As the Tribunal misconstrued the provisions of the partnership deed and relied upon irrelevant considerations in coming to the conclusion it did the High Court rightly differed from the view of the Tribunal
In the circumstances in view of the decision of this Court in Sree Meenakshi Mills  case  a question of law within the meaning of s662 of the Act arose for decision
The High Court rightly answered the question in the negative
In the result the appeal is dismissed with costs
SHAH J Sivakasi Match Export Companv hereinafter referred to as the assessee  is a partnership carrying on business as bankers commission agents and distributors of the products of different match factories at Sivakasi in the State of Madras
The assessee was formed under a deed dated April 1 1950
There were five partners of the firm 1 N P A M Sankaranlinga Nadar 2 K section section Arumugha swami Nadar 3 K A section Arunuchala Nadar 4 K P A T Rajamoney Nadar and 5 V section V P Palaniswamy Nadar
Before April 1 1950 there existed a firm also named Sivakasi Matches Exporting Company which consisted of a combine of six match factories at Sivakasi constituted under a partnership deed dated March 12 1948
Registration of this partnership under section 26 A of the Income tax Act 1922 was refused on the ground that the partnership deed did not specify the actual shares of the individual partners
Thereafter a deed forming the partnership which is sought to be registered in these proceedings was executed on April 1 1950
It was recited in the preamble that originally four out of the five partners had been carrying on business in partnership as representatives of their respective match concerns and it was found necessary that they should carry on the said business from April 1 1950 jointly in their individual capacity and it was agreed to admit into their part 1 I956 SCR 691 29 nership as and from April 1 1950 the fifth person namely V section V Palaniswamy Nadar
The following are the material paragraphs of the agreement of partnership 16 This firm shall collect a commission of half an anna per gross on the entire production of the match factories of the partners respectively the Brilliant Match Works Manoranjitha Match Works Pioneer Match Works Shenbagam Match Works and Gnanam Match Works produced from 1st April 1950 whether sales were effected through this firm or not and a further commission of half an anna per gross on the sales effected through this firm
This commission will be collected on all kinds of matches produced from the abovesaid factories
The commission of half an anna per gross on the entire production of these factories accrued due at the end of every month shall be debited to the respective factories under advice to them 22 The business of this firm shall have and has no connection with the match manufacturing business carried on now by the partners separately or in partnership with others
23 Any loss to the firm by way of fire accident or by any other cause during the course of the business of the firm notwithstanding the fact that the loss might have arisen on the sale of or transaction relating to the match manufac turing concerns of the partners to this deed shall be borne by this firm and shall be equally divided between the partners to this deed
 It is common ground that each partner was concerned in the manufacture of matches either as owner or as partner with others
Sankaralinga Nadar carried on business as a manufacturer of matches with two others in the name of the Brilliant Match Works Armughaswamy Nadar as a partner with three other in the name of the Manoranjitha Match Works Arunachala Nadar as a partner with two others in the name of the Pioneer Match Works Rajamoney Nadar 30 as a sole proprietor of the Shenbagam Match Works and Palaniswamy Nadar as a partner with three others in the name of the Gnanam Match Works
On October 27 1952 the Income tax Officer passed an order under section 26 A granting registration of the partnership constituted under the deed dated April 1 1950 but the Commissioner of Income tax Madras exercising revisional jurisdiction under section 33 B of the Act set aside the order and directed that the partnership be assessed to tax as an unregistered firm
In the view of the Commissioner the partnership deed did not represent the true state of affairs and that the actual position as distinguished from the recitals in the partnership deed was that all the partners of the Match Factories were directly partners of the assesses and as the names of all the partners were not set out in the deed and the other requirements relating to registration had not been complied with registration be refused
The order was confirmed in appeal to the Income tax Appellate Tribunal
At the direction of the High Court of Madras Linder section 662 of the Indian Income tax Act 1922 the Tribunal referred the following question Whether on the facts and the circumstances of the case the refusal of registration of the assessee firm under section 26 A of the Income tax Act was correct in law The High Court answered this question in the negative
Against that order with special leave the Commissioner of Income tax has appealed to this Court
The Tribunal held that the covenants in the deed of partnership and especially in paragraphs 3 and 16 viewed in the light of the entry in the books of account of Gnanam Match Works debiting the capital contributed in the name of Palaniswamy Nadar to the assessee and not in the name of its partner and division of the profits received from the assessee by Palaniswamy Nadar Sankarlinga Nadar Aru maghaswamy Nadar and Arunachalam Nadar with others owners of their respective business indicated that the named partners were acting as representatives of those owners
The 31 High Court also held that cl 16 of the partnership agree ment did not impose any liability upon the manufacturing concerns to pay any commission as stipulated therein on the  production of the match factories
The High Court ob served Clause 16 does not lay any liability upon the manufacturing concerns and cannot operate as an enforceable contract against those other match companies
If one of those match companies should decline to put through its sales business through the assessee firm the only result would perhaps be that the partnership would not advance moneys or finance to that manufacturing concern it might also be that the particular partner interested in the manufacturing concern might stand to lose the benefit of this partnership
But that is not the same thing as to say that those manufacturing concerns themselves had become partners of the assessee partnership
 The High Court also observed that the assessee was not concerned with the disposal of the profits received by its partners
Finally the High Court observed that an indi vidual member of the partnership is not prevented from engaging in business as member of another partnership
The law does not prohibit such a course and even the Income tax law relating to registration of partnerships only refuses registration when the formation of such partnerships is intended to evade the incidence of income tax and nothing more
We are not satisfied that the Tribunal correctly appreciated the facts of the present case in coming to the conclusion that the match works were the real parties to this instrument of partnership
The Solicitor General appearing for the Commissioner contended that the High Court had in exercising its advisory urisdiction in substance assumed appellate powers and had ought to reappraise the evidence on which the conclusion of the Tribunal was founded
Counsel contended that the Tribunal had recorded a clear finding on the facts that the 32 match works were the real partners and the High Court was bound on the question framed to record its opinion on the questions of law referred on the basis of that finding
Section 26 A of the Indian Income tax Act enacts the procedure for registration of firms
By that section on be half of any firm application may be submitted to the Income tax Officer for registration if the firm is constituted under an instrument of partnership specifying the individual shares of the partners
The application has to be made by such person or persons and at such times and shall contain such particulars and shall be in such form as may be prescribed
It is open to a firm to carry on business without registration under the Indian Registration Act
By obtaining an order of registration the partners of the firm are enabled to et the benefit of lower rates of tax than those applicable to the whole income of the firm when charged as a unit of assessment
In the relevant year of assessment if the firm was unregistered the tax payable by it had to be determined as in the case of any other distinct entity and tax had to be levied on the firm itself
If however the firm was registered the firm did not pay the tax and therefore the tax payable by the firm was not determined but the share of profit received from the firm was added to the income of each partner and on the total so determined tax was levied against the partners individually
It is manifest that if the firm desired to secure this privilege it had to conform strictly to the requirements prescribed by law
Under the rules framed under section 59 of the Indian Income tax Act
1922 rules 2 to 6B deal with registration and renewal of registration of firms
The application for registration has to be signed by all the partners not being minors personally and the application has to be in the fornm prescribed by rule 3
The form prescribed requires the partners of the firm to disclose the names of each partner his address date of admittance to Partnership and other relevant particulars including each Dartrer s share in the profits and loss particulars of the firm as constituted at the date of the application and particulars of the apportionment of the income profits of gains or loss of the business profession or vocation in the previous year between the partners who in that previous 33 year were entitled to share in such income profits or gains or loss where the application is made after the end of the relevant previous year
If the Income tax Officer is satisfied that there is a firm in existence constituted as shown in the instrument of partnership and the application has been properly made he has to enter in writing at the foot of the instrument or certified copy as the case may be a certificate of registration of the partnership under section 26 A of the Act
This certificate of registration ensures only for the year mentioned therein but the firm is entitled to obtain renewal of the registration
On the conclusion recorded by the Tribunal that the partnership deed dated April 1 1950 was in truth an ins trument relating to an agreement to carry on business by all the persons who owned the five businesses of which the representatives signed the deed the application submitted by the live named partners of the assessee did not conform to the requirements of rules 2 and 3 and the Income tax Officer was bound to refuse registration
It is true that the ground given by the Tribunal that the share of profits received by individual partners of the assessee was distributed by four of those partners who had entered into partnership contracts with other persons in the business of their respective match factories standing independently of other grounds may not be of much value in deciding whether all the partners of the match factories were intended to be partners of the assessee
It is open to a partner who receives his share in the profits of the firm to dispose of that share in any manner he pleases and no inference from the distribution of the share of such profits alone can lead to the inference that the persons who ultimately received the benefit of the profits are partners of the firm which had distributed the profits
But the Tribunal adverted to three circumstances
The terms of the deed of partnership purported to impose an obligation to pay Commission on the production of the five match factories representatives of which sought to join as partners eo nomine
Imposition of such an obligation was in the view of the Tribunal inconsistent with the representatives of those factories being partners of the assessee in their individual capacities
Again it was 51 section C 3 34 found that Gnanam Match Works had contributed capital to the assessee directly and not through its representative
These wo circumstances coupled with the ultimate distribution of profits by the individual partners among the partners of the match factories led to the inference that each partner who signed the deed dated April 1 1950 was acting not in his personal capacity but as representing his match factory
Granting that the evidence from which the inference was drawn was not very cogent it was still exclusively within the province of the Tribunal to decide that question on the evidence before it and its decision that in entering into the deed of partnership the named partners represented their respective match factories was not open to be canvas sed in a reference under section 662 of the Indian Income tax Act
The High Court observed that cl 16 of the partnership deed did no impose any obligation upon the partners or their representatives of the five firms to pay commission as stipulated under that clause
Undoubtedly there is no covenant expressly imposing such liability upon the mach factories but it was open to the Tribunal from he incor poration of such an unusual covenant to infer that the named partners of the assessee were acting as representatives of their respective factories
To assume from the erms of cl 16 that the owners of these match factories were not bound by the covenants contained in cl 16 is to assume the answer to the question posed for opinion
There was also the circumstance that in the books of account of the Gnanam Match Works of which Palaniswamy Nadar was a representative capital was debited as contributed to the assessee
This indicated that the Gnanam Match Works was directly interested in the partnership
If that factory had made an advance to Palaniswamy Nadar to enable the latter to contribute his share of the capital the entry in the factory s books of account would have been in the name of its partner and not in the name of the assessee
That also is a circumstance justifying an inference that in entering into the deed dated April 1 1950 Palaniswamy acted for and on behalf of all the partners of the Gnanam Match Works
Sharing of profits received by the named partners with their partners in the respective match factories may not as I have 35 already observed by itself be a decisive circumstance
But that did not authorise the High Court to disregard the find ing of the Tribunal on a question which was essentially one of fact
When the High Court observed that they were satisfied that the Tribunal had not correctly appreciated the evidence in arriving at the conclusion that each Match factory was the real party in the instrument of partnership they assumed to themselves jurisdiction which they did not possess
It was not the case of the assessee that there was no evidence on which the conclusion arrived at by the Tribunal could be founded nor was it the case of the assessee that the conclusion was so perverse that no reasonable body of men properly instructed in the law could have arrived at that conclusion
It is also clear from the record that no such question was even canvassed before the Tribunal
Manifestly such a question could not arise out of the order of the Tribunal and none such was referred to the High Court
By the question actually referred the Tirbunal sought the opinion of the High Court whether on the facts and circumstances refusal of the application for registration of the assessee was correct in law
If it was the case of the assessee that the conclusion of the Tribunal was based on no evidence or that it was perverse the High Court could be asked to call for a reference from the Tribunal on that question
But that was never done
It is true that the object of enacting section 26 A and the rules relating to the procedure for registration is to prevent escapement of liability to tax
But it is not necessary that before an order refusing registration is made it must be established that there was evasion of tax attempted or actual
It is always open to a person consistently with the law to so arrange his affairs that be may reduce his tax liability to the minimum permissible tinder the law
The fact that the liability to tax may be reduced by the adoption of an expedient which the law permits is wholly irrelevant in considering the validity of that expedient
But where the law prescribes conditions for obtaining the benefit of reduced liability to taxation those conditions unless otherwise provided must be strictly complied with and if they are not 36 so complied with the taxing authorities would be bound to refuse to give the taxpayer the benefit claimed
When application for registration of the firm is made the Incometax Officer is entitled to ascertain whether the names of the partners in the instrument are of persons who have agreed to be partners whether the shares are properly specified and whether the statement about the shares is real or is merely a cloak for distributing the profits in a different manner
If all persons who have in truth agreed to be partners have not signed the deed or their shares are not truly set out in the deed of partnership it would be open to the Incometax Officer to decline to register the deed even if under the general law of partnership the rights and obligations of the partners eo nomine thereto may otherwise be adjusted
As a corollary to this if the requirements relating to the form in which the petition is to be presented are not complied with and the relevant information is withheld the Incometax Officer may be justified in refusing registration
In my view the High Court was in error in holding on the question submitted that the registration of the assessee under section 26 A of the Income tax Act was wrongly refused
The answer to the question referred to the High Court should be in the affirmative
ORDER In accordance with the opinion of the majority the appeal is dismissed with costs


Summary:
There were five firms in Sivakasi manufacturing matches under the name and style of Shenbagam Match Works Brilliant Match Works Manoranjitha Match Works Pioneer Match Works and Gnanam Match Works
The sole proprietor of Shenbagam Match Works and one partner from each of the four firms entered into a partnership in their individual capacity and executed a partnership deed dated April 1 1950
The Income tax Officer registered the said partnership deed under section 26A of the Act but the Commissioner of Income tax acting under section 33B of the Act cancelled the registration of the said partnership deed
On appeal the Tribunal held that the said partnership deed was not a genuine one
On a reference the High Court held on a construction of the partnership deed that the Match Works were not the real parties to the partnership but the parties to the document were the real partners
This appeal has come by way of special leave
HELD i per K Subba Rao and section M Sikri JJ that the discretion conferred on the Income tax Officer under section 26 A of the Act is a judicial one and he cannot refuse to register a firm on mere speculation but he shall base his conclusion on relevant evidence
The jurisdiction of the Income tax Officer under section 20 A is confined to the ascertaining of two facts namely i whether the application for registration is in conformity with the rules made under the Act and ii whether the firm shown in the document
Partnership deed presented for registration is a bogus one or has no legal existence
ii In the present case the partnership deed ex facie conforms to the requirements of the law of partnership as well as the Income tax Act
There is no prohibition under the partnership Act against a partner or partners of other firms combining together to form a separate partnership to carry on a different business
The fact that such a partner or partners entered into a sub partnership with others in respect of their share does not detract from the validity of the partnership nor the manner in which the said partner deals with the share of his profits is of any relevance to the question of validity of the partnership
iii The tribunal erred in holding the partnership deed as not a genuine one
In the present case the assessde firm has a separate legal existence and as such the two circumstances relied upon by the Tribunal namely that one of the partners of the assessee firm brought in the capital from his parent firm or that the profits earned by some of the partners were surrendered to the parent firm would be irrelevant
A partner of a firm can certainly  secure his capital from any source or 20 surrender his profits to his sub partner or any other person
Those facts cannot conceivably convert a valid partnership into a bogus one
In the present case the partnership deed is a genuine document and it complies with the requirements of law
It is not an attempt to evade tax but a legal device to reduce its tax liability
iv A question of law within the meaning of section 662 of the Act arose for decision in this case as the Tribunal misconstrued the provisions of the partnership deed and relied upon irrelevant considerations in coming to the conclusion
Sree Meenakshi Mills Ltd vs Commissioner of Income tax Madras
19561 SCR 691 relied on
Per Shah J i It was exclusively within the province of the Tribunal to decide the question whether the partners entered into the partnership in their individual capacities or as representing their match factories and its decision that in entering into the deed of partnership the named partners represented their respective match factories was not open to be canvassed in a reference under section 662 of the Indian Incometax Act
In a reference under section 662 the High Court was not authorised to disregard the finding of the Tribunal on a question which was essentially one of fact
In the present case the High Court was not justified in interfering with the finding of the Tribunal on a question of fact because it was not the case of the assessee that the conclusion of the Tribunal was based on no evidence or that it was perverse
ii Where the law prescribes conditions for obtaining the benefit of reduced liability to taxation those conditions unless otherwise provided must be strictly complied with and if they are not so complied with the taxing authorities would be bound to refuse to give the tax payer the benefit claimed
It would be open to the Income tax Officer to decline to register a deed even if under the general law of partnership the rights and obligations of the partners ex nomine thereto may otherwise be adjusted
If the requirements relating to the form in which the petition is to be presented are not complied with and the relevant information is withheld the Income tax Officer may be justified in refusing registration
In the present case the Income tax Officer was bound to refuse registration as the application submitted by the five partners of the assessee did not conform to the requirements of rr 2 and 3 of Indian Income tax Rules