Case: Dulichand Lakshminarayan Vs. The Commissioner Of Income-Tax,Nagpur

or paid to him. Conversely, separate property of a partner is applied first in the payment of his separate debts and the surplus, if any is utilised in meeting the debts of the firm (see S. 49, Indian Partnership Act, 1932). In the Indian Income-tax Act itself a firm is, by section 3, which is the charging section, made a unit of assessment.15. It is clear from the foregoing discussion that the law, English as well as Indian, has, for some specific purposes, some of which are referred to above, relaxed its rigid notions and extended a limited personality to a firm. Nevertheless, the general concept of partnership, firmly established in both systems of law still is that a firm is not an entity or "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 who have agreed to carry on business in partnership. According to the principles of English jurisprudence, which we have adopted, 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, (1880) 14 Ch D 122 at p. 126 (B). In these circumstances to import the definition of the word "person" occurring in section 3(42) of the General Clauses Act. 1897, into section 4 of the Indian Partnership Act will, according to lawyers, English or Indian, be totally repugnant to the subject of partnership law as they know and understand it to be. It is in this view of the matter that it has been consistently held in this country that a firm as such is not entitled to enter into a partnership with another firm or individuals. It is not necessary to refer in detail to those decisions many of which will be found cited in 1955-27 ITR 88 (A) to which a reference has already been made. We need only refer to the case of - Bhagwanji Morarji Goculdas v. Alembic Chemical Works Co. Ltd. , 1948 PC 100 (AIR V. 35) (C), where it has been laid down by the Privy Council that Indian Law has not given legal personality to a firm apart from the partners. This view finds support from and is implicit in the observations made by this Court in the - Commr. of Income-tax, West Bengal v. A. W. Figgies and Co. , 1953 SC 455 (AIR V. 40) (D).16. In re, Jai Dayal Madan Gopal, 1933 All 77 (AIR V. 20) (E) Sulaiman C. J. followed the Calcutta decisions and was not prepared to dissent from the view that the word "person" in S. 239, Indian Contract Act, 1872 should not be interpreted so as to include a firm. The learned Chief Justice, however, expressed the view that it was difficult to say that there was anything is section 239 itself which made the application to that section of the definition of "person" as given in General Clauses Act in any way repugnant.The learned Chief Justice, however, does not appear to have considered whether there was anything repugnant in the subject of partnership law, as it prevails in this country, which operates to exclude the application of that definition to the word "person" occurring in section 239 of the Indian Contract Act. In our opinion, the word "persons" in section 4 of Indian Partnership Act, which has replaced section 239 of the Indian Contract Act, contemplates only natural or artificial, i.e., legal persons and for the reasons stated above, a firm is not a "person" and as such is not entitled to enter into a partnership with another firm or Hindu undivided family or individual.In this view of the matter there can arise no question of registration of a partnership purporting to be one between three firms, a Hindu undivided family business and an individual as a firm under section 26-A of the Act.17. The learned Advocate for the appellant then urges that, at any rate, the partnership was not illegal, for there was no legal impediment in the way of all the members of all the three constituent firms and the Karta of the Hindu undivided family and the individual entering into an agreement and that, therefore,a valid partnership was constituted by the deed of partnership under consideration. Assuming that this contention is possible in view of the language which has been used in this deed for describing the parties,the position of the appellant will not improve, for, in order to be entitled to the benefit of registration under the Act, it will have to be shown that the shares of all individual partners are specified in the deed and that all the partners have personally signed the application for registration as required by section 26-A of the Act read with R. 2.The deed specifies that each of the five constituent parties is entitled to an equal, i.e., 1/5th share but it does not specify the individual shares of each of the partners of each of the three smaller constituent firms. Further all the members of those three firms have not signed the application for registration personally.It is said that each of the three persons who executed the deed for the three smaller firms must be regarded as having the authority of their co-partners in their respective firms to sign the application for registration just as they had their authority to execute the deed itself for them. Even if they had such authority - as to which there is no evidence at all on the record - the section and R. 2 require that each partner (not being minor) must sign personally. That admittedly has not been done, and therefore, the application was not in proper form. In our Judgment the answer given by the High Court to the question is correct.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]At the hearing before us it was at one time suggested that the partners of the firm consisted of the five individuals who had signed the deed and each of them had an equal share as specified therein and that as all the said five partners had signed the application for registration the requirements of section 26-A of the Act and R. 2 had been fully complied with and the assessee should have been registered as a firm for the purposes of the Act. A perusal of the deed and particularly the portions hereinbefore set out indicate beyond any doubt that the intention of the parties quite clearly was that each of the three constituent firms and not the particular member of each of the said three firms who had signed the deed for his respective firm was to be the partner in the bigger firm constituted under this deed. The contention that only the five individual executants of the deed were the partners of the newly created firm runs counter to the apparent tenor of the deed and cannot be entertained. Indeed learned counsel appearing in support of this appeal did not press thisis difficult to say that there is anything repugnant in the context of section 4 itself which will exclude the application of that definition to the word "person" occurring in section 4.It is clear from the foregoing discussion that the law, English as well as Indian, has, for some specific purposes, some of which are referred to above, relaxed its rigid notions and extended a limited personality to a firm. Nevertheless, the general concept of partnership, firmly established in both systems of law still is that a firm is not an entity or "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 who have agreed to carry on business in partnership. According to the principles of English jurisprudence, which we have adopted, 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, (1880) 14 Ch D 122 at p. 126 (B). In these circumstances to import the definition of the word "person" occurring in section 3(42) of the General Clauses Act. 1897, into section 4 of the Indian Partnership Act will, according to lawyers, English or Indian, be totally repugnant to the subject of partnership law as they know and understand it to be. It is in this view of the matter that it has been consistently held in this country that a firm as such is not entitled to enter into a partnership with another firm orour opinion, the word "persons" in section 4 of Indian Partnership Act, which has replaced section 239 of the Indian Contract Act, contemplates only natural or artificial, i.e., legal persons and for the reasons stated above, a firm is not a "person" and as such is not entitled to enter into a partnership with another firm or Hindu undivided family or individual.In this view of the matter there can arise no question of registration of a partnership purporting to be one between three firms, a Hindu undivided family business and an individual as a firm under section 26-A of thethat this contention is possible in view of the language which has been used in this deed for describing the parties,the position of the appellant will not improve, for, in order to be entitled to the benefit of registration under the Act, it will have to be shown that the shares of all individual partners are specified in the deed and that all the partners have personally signed the application for registration as required by section 26-A of the Act read with R. 2.The deed specifies that each of the five constituent parties is entitled to an equal, i.e., 1/5th share but it does not specify the individual shares of each of the partners of each of the three smaller constituent firms. Further all the members of those three firms have not signed the application for registration personally.It is said that each of the three persons who executed the deed for the three smaller firms must be regarded as having the authority of their co-partners in their respective firms to sign the application for registration just as they had their authority to execute the deed itself for them. Even if they had such authority - as to which there is no evidence at all on the record - the section and R. 2 require that each partner (not being minor) must sign personally. That admittedly has not been done, and therefore, the application was not in proper form. In our Judgment the answer given by the High Court to the question is