Muthappa and Sons, Mangalore vs Commissioner of Income Tax, Madras

Rajagopalan, J.—The question referred to this court u/s 66(1) of the Income Tax Act ran;

Whether the firm can be registered u/s 26-A of the Indian Income Tax Act for the assessment year 1949-50.

The partnership which constituted the assesses firm was evidenced by the deed dated 20-8-1945. That deed provided that Raghavendra Suvarna

should manage the affairs of the partnership. Nagamma was one of the six partners. She died on 1-1-1948.

The firm was registered u/s 26-A and the last of the renewals of registration was for the assessment year 1948-49. On 9-9-1949 the firm

applied for registration for the assessment, year 1949-50. The corresponding account year of the assessee had ended on 30-6-1948. By then

Nagamma was dead. The application was signed by the five surviving partners including Raghavendra Suvarna, and he signed over again for and

on behalf of Nagamma. The Departmental authorities refused registration on the ground, that the application did not conform strictly to the

statutory rules governing the registration u/s 26-A. The Tribunal upheld that view.

The deed of partnership dated 20-8-1945 provided that the partnership should Continue for a period of 20 years despite the death or disability

of any of the six partners. The deed recited that the executants of that document should mean and include their heirs, executors and administrators.

There was however no specific provision for bringing into the partnership the legal representatives of a deceased partner. The four minor children

of Nagamma were her heirs-at-law when she died on 1-1-1948. There was no deed to evidence that these minors were admitted to the benefits of

the partnership, which continued despite the death or Nagamma. The share of the profits which Nagammal would have been entitled to had she

lived upto the end of the account year, was credited that year in the books of the assessee firm to the minor children of Nagamma.

It should be taken as well settled now that, before an assessee can claim the statutory right of registration u/s 26-A of the Act, there must be a

strict compliance with the provisions of that section and the statutory rules. The Tribunal was right in the view it took, that the application dated 9-

9-1949 did not satisfy these requirements. It was true that the five surviving partners signed the application but Raghavendra could not validly

represent the deceased Nagamma.

The learned counsel for the assessee urged that the Income Tax Officer could have granted registration upto 1-1-1948, the date on which

Nagamma died. The assessee firm with its five surviving partners could have applied for registration upto 1-1-1948; but it did not. Alternatively, It

could have admitted the minors, the legal representatives of Nagamma, to the benefits of the partnership and could have applied for registration on

that basis. That was not done either. The application it actually preferred on 9-9-1949 was rightly refused. Despite that, it may be open to the

Government to grant relief to the assessee firm at least ex gratia, if the assessee acted in good faith, but misconceived the scope of the statutory

conditions to be complied with before claiming the statutory right u/s 26-A of the Act. We can only answer the question referred to us, and our

answer in the circumstances of the case must be, in the negative and against the assessee. We direct however that each party to this reference shall

bear his costs. Counsel''s fee Rs. 250.