Appeal No 328 of 1959
Appeal by special leave from the judgment and order dated 23rd February 1956 of the Bombay High Court in Income tax Reference No 34 of 1955
K N Rajagopala Ayyangar and D Gupta for the appellant
Rameshwar Nath section N Andley J B Dadachanji and P L Vohra for the respondent
December 1
The Judgment of the Court was delivered by HIDAYATULLAH J
The Commissioner of Incometax has filed this appeal with special leave against the judgment and order of the High Court of Bombay by which the High Court answered two questions referred to it in favour of the respondents Messrs Dwarkadas Khetan  Co Bombay
These questions were 1 Whether the instrument of partnership dated 27 3 1946 created a deed of partnership 2
If the answer to question No 1 is in the affirmative whether the fact that on 1 1 1946 there was no firm in existence would be fatal to the application for registration of the firm under Section 26A of the Indian Income tax Act or whether the firm could be registered with effect from 26 3 1946 if it is held that the firm was genuine Prior to January 1 1945 there was a firm called Dwarkadas Khetan  Co On that date the firm ceased to exist because the other partners had previously withdrawn and it came to be the sole proprietary concern of Dwarkadas Khetan
On February 12 1946 Dwarkadas Khetan obtained the selling agency of Seksaria Cotton Mills Ltd On March 27 1946 he entered into a partnership with three others 823 by an instrument of partnership executed that day
Those three others were Viswanath Purumul Govindram Khetan and Kantilal Kasherdeo
Dwarkadas Khetan s share in the partnership was 7 annas in the rupee while the remaining 9 annas  share was divided equally among the three others
Though Kantilal Kasherdeo was a minor he was admitted as a full partner and not merely to the benefits of the partner ship as required by section 30 of the Indian Partnership Act
To the instrument of partnership Kantilal Kasherdeo was also a signatory though immediately after his signature there was the signature of one Kasherdeo Rungta the natural guardian of the minor
In the instrument Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital
It was also provided that all the four partners were to attend to the business and if consent was needed all the partners including the minor had to give their consent in writing
The minor was also entitled to manage the affairs of the firm including inspection of the account books and was given the right to vote if a decision on votes had to be taken
In short no distinction was made between the adult partners and the minor and to all intents and purposes the minor was a full partner even though under the partnership law he could only be admitted to the benefits of the partnership and not as a partner
The deed of partnership was produced before the Registrar of Firms showing the names of the four partner
The Registrar of Firms granted a registration certificate and in the certificate Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the partnership
Banks were also informed about the four partners and
it does not appear that to them intimation was sent that one of the named partners was a minor
Though the partnership came into existence on March 27 1946 the firm was stated to have started retrospectively from January 1 1946
It may be pointed out that the firm has the calendar year as its account year and the matter before us refers to the account year 1946 corresponding to the assessment year 1947 48 824 For purposes of that year registration of the firm was sought under section 26A of the Indian Income tax Act
The Income tax Officer refused to accord registration on the ground that a minor had been admitted as a partner contrary to law and that the deed could not therefore be registered
The appeal to the Appellate Assistant Commissioner also failed the Commissioner holding that registration could only be of a legal or valid document and not of a document which was invalid in law
An appeal was then taken to the Tribunal and it was contended that the document must be construed as showing only that the minor was admitted not as a full partner but to the benefits of the partnership
The Accountant Member hold that the order of the Appellate Assistant Commissioner was correct giving two reasons
The first was that the construction sought to be placed upon the document was not open and the second that since retrospective operation was given to the firm even though no firm existed from January 1 1946 registration could not be granted
The Judicial Member differed from the Accountant Member holding as was contended that the document must be construed as showing merely that the minor had been admitted to the benefits of the partnership
The appeal was then placed before the President who agreed with the conclusion of the Accountant Member with the result that the refusal to register the firm under section 26A by the authorities was upheld
Two questions were then posed for the decision of the High Court
The High Court differed from the Tribunal and answered both the questions in favour of the assessee
In so far as the second question is concerned the matter is now settled by the decision of this Court in B C Mitter  Sons vs Commissioner of Income tax 1
But in our opinion the decision of the High Court on the first question was not correct and the correct answer does not leave the second quest ion open at all
There is a distinct cleavage of opinion among the High Courts on this point
The Bombay Madras and 1 825 Patna High Courts have held that where a minor is admitted as a full partner by adult partners the document can be registered after interpreting it to mean that the minor has been admitted to the benefits of partnership and not as a full partner
The Calcutta Allahabad and Punjab High Courts have taken a contrary view
The Bombay case is the one which is under appeal and the Patna High Court followed that decision and the two earlier decisions of the Madras High Court
The Madras High Court decisions are of the same Divisional Bench and were pronounced on the same day
The leading case in support of the respondents is the Madras decision reported in Jakka Devayya and Sons vs Commissioner of Income tax 1 and that case alone needs to be considered because all the reasons on which the cases on this side have proceeded are given there
In that case there were three partners one of whom was a minor
They formed a Hindu undivided family later a deed of partnership was executed in which the minor was represented by his father in law
It was held that the fact that the minor was included as a partner did not make the partnership as between the two adult partners invalid and that the minor must be deemed to have been admitted to the benefits of the partnership by the two adults
The learned Judges referred to the provision of section 2 6 B of the Income tax Act where it is provided  Partner includes any person who being a minor has been admitted to the benefits of partnership and observed that in view of this definition and the fact that a minor could be admitted to the benefits of partnership under section 30 the document was not invalid but must be read as giving to the minor the rights laid down by the Partnership Act
They also observed that too rigid a construction need not be put upon the deed and referred to Lindley on Partnership 11th Edn p 87 and A Khorasany vs C Acha and Others 2
The other cases which we need not examine are Vincent and Others vs Commissioner of 1 2 Ran
826 Income tax and Sahai Brothers vs Commissioner of Income tax On the other hand there is a decision of the Calcutta High Court reported in Hoosen Kassam Dada vs Commissioner of Income tax Bengal 3 in which Costello and Panckridge JJ have held that under section 26A of the Income tax Act and the Rules the Income tax Officer is only
empowered to register a partnership which is specified in the instrument of partnership and of which registration is asked for
The learned Judges therefore hold that it is not open to the Department to register partnership different from that which is formed by the instrument
In Hardutt Ray Gajadhar Ram vs Commissioner of Income tax4 Malik C J and Seth J hold that where a minor is admitted as a full partner with equal rights and obligations with adults the deed is invalid
It is pointed out that the English law on the subject is different
In that case however there was one other ground for invalidating the deed because the minor had been adopted into another family and his natural father who had signed as his guardian in the deed could not do so as he had ceased to be the natural guardian
The decision however supports the case of the Commissioner
In Banka Mal Lajja Ram  Co vs Commissioner of Income tax 5 it is held that a minor cannot be a partner and that the partnership which admits a minor as full partner cannot be registered
It is true that in that case the High Court did not consider the question whether the partnership should have been taken to be a valid partnership consisting of the adult partners because no such question was referred
The decision however is against a claim for registration of such a document
In our opinion the Calcutta vie  is preferable to the view taken by the Madras High Court
The error in the Madras view is in using the definition to show that a deed including a minor as a competent partner 11952 31937 21950 41950 51953 827 is valid
What the definition does is to apply to a minor admitted to the benefits of partnership all the 2 provisions of the Income tax Act applicable to partners
The definition cannot be read to mean that in every case where a minor has contrary to law been admitted as a full partner the deed is to be regarded as valid because under the law a minor can be admitted to the benefits of partnership
The Rules which have been framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration
The law requires all partners to sign the application and if the definition were to be carried to the extreme even a minor who is admitted to the benefits of partnership would be competent to sign such an application
The definition is designed to confer equal benefits upon the minor by treating him as a partner but it does not render a minor a competent and full partner
For that purpose the law of Partnership must be considered apart from the definition in the Income tax Act
Section 30 of the Indian Partnership Act clearly lays down that a minor cannot become a partner though with the consent of the adult partners he may be admitted to the benefits of partnership
Any document which goes beyond this section cannot be regarded as valid for the purpose of registration
Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it
If the Income tax Authorities register the partnership as between the adults only contrary to the terms of the document in substance a new contract is made out
It is not open to the Income tax authorities to register a document which is different from the one actually executed and asked to be registered
In our opinion the Madras view cannot be accepted
The judgment under appeal has followed the Madras view and in our opinion it falls into the same error in which the Madras High Court had fallen earlier
The answer to the first question should therefore have been in favour of the Department
The answer given by the High Court is vacated and 828 the question will now be answered in the negative
As already stated there is no need to answer the second question which does not arise
The appeal is allowed with costs here and in the High Court
Appeal allowed


Summary:
One of the persons who entered into a partnership was a minor and in the instrument of partnership he was described as a full partner with equal rights and obligations with the other adult partners
The deed of partnership which was signed by the minor was produced before th e Registrar of Firms f or registration and he granted a certificate showing the minor as a full partner and not as one entitled merely to the benefits of the partnership
The Income tax Officer however refused to register the firm under section 26A of the Indian Income tax Act and his decision was upheld by the Income tax Authorities and the Income tax Appellate Tribunal
The High Court differed from the Tribunal and held that the firm should be registered
On appeal by the Commissioner of Income tax Held that the Rules framed under section 26A quite clearly show that a minor who is admitted to the benefits of partnership need not sign the application for registration
The law requires all partners to sign the application and if the definition were to be carried to the extreme even a minor who is admitted to the benefits of partnership would be competent to sign such an application
The definition is designed to confer equal benefits upon the minor by treating him as a partner but it does not render a minor a competent and full partner
For that purpose the law of Partnership must be considered apart from the definition in the Income tax Act
Section 30 of the Indian Partnershi Act clearly lays down that a minor cannot become a partner I tough with the consent of the adult partners he may be admitted to the benefits of partnership
 Any document which goes beyond this section cannot be regarded as valid for the purpose of registration
Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it
If the Income tax Authorities register thepartnership as between the adults only contrary to the terms of the document in substance a new contract is made out
It is tot open to the Incometax Authorities to register a document which is different from the one actually executed and asked to be registered
Hoosen Kassam Dada vs Commissioner of Income tax Bengal 19375 ITR 182 Hardutt Ray Gajadhar Ram vs Commissioner of 104 822 Income tax  Banka Mal Lajja Ram and Co vs Commissioner of Income tax  approved
Jakka Devayya and Sons vs Commissioner of Income tax 1952  disapproved