Case: Commissioner Of Income-Tax, Andhra Pradesh,Hyderabad Vs. Jayalakshmi Rice And Oil Mills Contractor Co

2. The facts are not in dispute. The assessee firm was constituted under a creed of partnership dated October 6, 1955. It was to come into existence with effect from November 5, 1954. The assessee filed an application under Section 26-A 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, l955. 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 Section 58 ofthe 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 Section 26-4 inter alia for the reason that the application had not been made in time. The appeal taken to Appellate Assistant Commissioner by the assessee failed. The Income tax 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 assessee on the ground that the application had been filed in time.

Reasoning: 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 Section 59 of the Partnership Act by the Registrar. It is true that sub-section (l) of Section 58 employs language which without anything more may 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 Section 59 pursuant to it the registration would be effective from the date when the application was presented. But Section 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, Section 59 and Section 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. Commr. of Income-tax Kerala. (1964) 51 ITR 711   = (AIR 1964 Kerala 251) clearly expressed the view that reading Sections 58 and 59 of the Indian Partnership Act together a firm cannot be said to be registered when the statement prescribed by Section 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 register of firms and the statement is filed by the Registrar as provided in Sec. 59. In that case also an identically similar question arose in respect of registration of a firm under Section 26-A of the Income tax Act5. 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 Sec. 58 corresponding to Section 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 register 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.