-•

365

A €0MMISSIONER OF INCOME-TAX, ANDHRA PRADESH,

HYDERABAD

B

c

D

E

F

G

v .

.JAYALAKSHMI RICE AND OIL MILLS CONTRACTOR CO.

January 15, 1971

[J.

c.

SHAH, C.J., K. s. HEGDE AND A. N. GROVER, JJ.]

Income-tax Act, 1922, s. 26A-Income-ta!< Rules, r. 2(b)-Indian

Partnership Act, 1932, ss. 58, 59, 69-Rule 2(b) 11taviding that in respect

of firms registered under Partnership Act the application for registration

of firm u/s 26A of the Income-tax Act shall be made before the end of

the previous year-Firm can be said to be registered under Parwrship

Act not on date of receipt of app/iCQ/ion under a. 58 but when entry is

made

in register of firms under s.

59--:-IJ such an entry is made after end

of 'previous year' firm is not registered under the Partnership Act for the

purpose

of r. 2(b).

Tue assessee firm was constituted under a deed of partnership dated

October 6, 1955. It was to come into existence with effect from November

5, 1954. Tue assessee filed an application under s. 26A of the Act for

registratlon of the firm for the assessment year 1956-51. The previous

year of the firm was shown as the year ending October 26, 1955. The

application

was received by the Income-tax Officer

·an October 14, 1955.

On October 20, 1955 the assessee filed before the Regiatrar df Firms a

statement under s. 58 of the Indian Partnership Act, 1932. On November

2, 1955 the Registrar of Firrmr1iled the statement of ~he assessce 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 s. 26A inter alia

for the reason that the application had not

been made in time. The appeal

taken to

the Appellate Assistant Commissioner failed. The Tribunal also

upheld the order

of the authorities below. In reference

t!fe High Court

answered the question

in favour of the assessee holding that the partnership

should be deemed to have been

registered on the date when the application

was presented and that the requirement of r. 2(b) of the Rules would

be satisfied

if it became registered under the Partnership Act even after

the application under s. 26A was filed. In appeal by the Revenue.

HELD : (i)

The view taken by the High Court was not correct. Under

the Partnership '•w it can be taken to have been settled by decisioRs of

High Courts, from. a long time that the registration of firm takes place

only when necessary entries are made in the register

of firms under s. 59

of the Partnership Act

by_the Registrar. Section 58 of the Act no doubt

employs language which, without anything more may appear to lend sup­

port 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 s. 59 pursuant to it the registration

would

be effective from the date when the application was presented. But ;. 58(2) is not to be read in isolation and has to be considered along with

the scheme df the other provisions of the Act viz. ss. 59 and 69. The

latter

section which deals with the

effect of non-registration throws light

on what was contemplated by the Legislature with regard to the point of

time when the firm could be regarded as registered.

[368

C-OJ

H Ram Prarttd v. Kamta Prasad, A.LR. 19l5 All. 898, Danmal Par­

shotamadas v. Haburam Chhotelal. I.L.R. [1936) 58 All. 495 and Kera/a

Road Lines Corporation

v. Commissioner of Income-tax, Kera/a

51 J.T.R.

71 1, approved.

366 SUPREME COURT REPORTS [1971 J3 S.C.R.

(ii) The views expressed by the Special Committee appointed by the

Government of India

in respect of the Bill which came to

·be passed by

the Central Legislative as the Partnership Act were irrelevant for the pur­

po"' of construing the provisions of the Act. [1369 Bl

CIVIL APPELLATE JURISDICTION; Civil Appeal No. 545 of

1967. .

Appeal from the judgment and order dated April 15, 1966 of

the Andhra Pradesh High Court in Case Referred No. 40 of 1963.

S. C. Manchanda. B. D. Sharma and R. N. Sachthey, for the

appellant.

K. Rajendra Chaudhuri, for the respondent.

The Judgment of the Court

was delivered by

Grover, J. This is an appeal from a judgment of the Andhra

A

B

c

Pradesh High Court arising out of a reference made under s. 66( 1)

of the Income-tax Act, 1922, hereinafter called the 'Act' of

the

question whether on the facts and in the circumstances of the case (

the application under s. 26A of the Act was filed out of time. D

The facts are not in dispute. The assessee firm was consti­

tuted under a deed of partnership dated October 6, 1955. It

was to come into existence with effect from November 5, 1954.

The

assesse_e filed an application under

~. 26A of the Act for

registration of the

firm for the assessment year 1956-57. The

'previous year' of the

fim1 was shown as the year ending October E

26, 1955. This application was received by the Income-tax

Officer on October 14, 1955.

On October 20. 1955 tile assessee

filed before the Registrar of Firms a statement under

s. 58 o.f the

Indian Partnership Act 1932.

On November 2, 1955 the Regis­

trar of Firms filed the statem~t of the assessee and made entries

in the registrar of fimls. On March 23, 1961 the Income-tax F

Officer passed an order refusing to register the

firm under s. 26A

1inter alia, for the reason that the application. had not been made

in time. The appeal taken to the Appellate Assistant

Commis­

sioner 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 refe\ence was sought and the G

High Court answered the question referred in favour of the

asses-.~ee on the ground that the application had been filed in time.

Section

26A of the Act

provicks that an application may be

made to the Income-tax Officer on behalf of any

firm constituted tmder an fostrument of pertnership specifying the individual H

>hares of the partners for registration for the purposes of the Act.

The application has to be made by such person or persons and

at such time and has to contain such particulars etc.

as may

be

A

B

c

D

E

F

G

H

C.I.T. v. JAYALAKSHMI RICE MILLS (Grover, J.) 367

prescribed. Rubs 2 to 6 (b) of the Rules made under s. 59 of

the Act deal with registration of

firms. We are concerned with

the following material portion of Rule

2.

''Such application shall ........ be .... made ... .

(a) Where the firm is not registered under the

Indian Partnership Act, 1932 (IX of 1932) o:

or where the deed of Partnership

is not

regis­

tered under the Indian Registration Act, 190~

(XVI of 1908), and the application for regis­

tration

is being made for the first time

under

the Act,

(i) Within a period of

six months of the

con­

stitution of the firm or before the end of

the 'previous year' of the firm whichevec·

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

(IX of 1932) or

where

the need of partnership is registered under the

Indian Registration Act (XVI of 1908) befor<!

the end of the previous year of the firm ...... ..

Now it is common ground that the application for registration

was not made within the period prescribed by rule 2 (a). What

has been urged throughout on behalf of the assessee

is that the

application to the Income-tax Officer was governed by

rule 2(b)

and was in time as the firm should be deemed to have been

registered not on

'the date on which it was actually registered

by the Registrar of Firms but with effect from the date on which

the

application for registration was presented to the Registrar.

In other ·words the firm should be considered to have been regis­

tered on October 20, 1955 on which date the statement under

s. 58 of the Partnership Act was filed by the assessee before the

Registrar of Firms.

The real question which has to be <ietermined is whether the

registration of a

firm under the Partnership Act takes

plac.e with

effect from the date on which the application for registration is

made in accordance with s. 58 of that Act. Section 58 ( 1 I pro­

vides that the registration of a firm may be effected. at any time

by sending by post or delivering tu the Registrar of the area in

which any place of business of the

firm is situated or proposed to be situated a statement in the prescribed form and 3~com-

368 SUPREME COURT REPORTS [1971]3 s.c.R.

panied by the prescribed fee stating. . . . . . . . Under s. 59 when A

the Registrar is satisfied that the provisions of s. 58 have. been

duly complied

with he shall record an entry of the statement in

a registrar called the

"register of firms' and shall file the state­

ment. In Ram Prasad v. Kamta Prasad(') it was laid down that

the registration of . a firm under the Pertiwrship Act takes place

only when the necessary entry

is made in

the register of firms, B

Even under

s. 69 of the Partnership Act which deals with

th.;

effect of non-registration it has been consistently held that the

registration of a

firm subsequent to the filing of the suit did not

cure the defect;

See Danmal Parshotamdas v. Baburam

Chhote­

la/(2). Thus under the Partnership law it can be takcm to have

been settled by

decisions of High Courts from a long time that the C

registration of a

firm takes place only when the ·necessary entry

is made in the register of firms under s. 59 of the Partnership

Act by the Registrar.

It is true that sub-section ( 1) of s. 58

employs language which without anything more may land

sup­

port to the view that the registration of a firm may be effected

merely by sending an application which would mean that as soon D

as an application is sent and if entry is made under s. 59

pursuant

to it the registration would be effective from the date. when the application was presented. But s. 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, s. 59 and s .. 69.

The latter section

may not have a direct bearing on the point

under our consideration but it

throws light on what was

contem­

plated by the legislature with regard to the point of time when

tlie firm could be regarded as registered. The Ker ~ia High

Court has

in Kera/a Road Lines Corporation v. Commissioner of Inco~·tax, Kerala(

8

), clearly expressed the view that reading

E

SS. 58 and 5c; of the Indian Partnership Act together a firm ,can-

not be said to be registered when the statement prescribed by F

. ·s. 58 and the required fee are sent to the Registrar and th11t the

registration of the

firm is effected only when the entry of the

statement

is recorded in

the registrar of firms and the statement

is

field by the Registrar as provided in s. 59. In that case also

an identically similar question arose in respect of registration of

a

fu:!n under s. 26A of the Income-tax Act.

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

Partinership Act and reference was made

G

in particular to the statement relating to clause 58 corresponding H

(I) AIR [1935] All. 898. (2) I.LR. [1936] 58 All. 495.

(3) 5HT.R. 711.

C.I.T. v. JAYALAKSHM! '""" MILLS (Grover, I.) 369

A

to s. 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 registrar of firms. We are unable to see

how that statement can be taken into consideration for the pur­

pose of interpreting the relevant provisions of the Partnership Act.

We also cannot concur with the other. reasoning of the High Court

B for coming to the conclusion that the partnership should be deem­

ed to have been registered on the date when the .application was

preser.ted 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.

c

For the reasons given above the apPeal is allowed and the

judgment

of

the High Court is set aside. The answer to the

question referred must be

given in the

affirmativ~ and against the

assessee. The appellant shall be entitled to costs .in this Court.

G.C. A~ea/ al/owetf.

\.

10-L807Sup. Cl/71 .