Commissioner Of Income-Tax, … vs Jayalakshmi Rice And Oil Mills … on 15 January 1971

Civil Appellate Jurisdiction:

Civil Appeal No. 545 of 1967.

Equivalent citations:

1971 AIR 1015, 1971 SCR (3) 365

Bench:

Grover, A.N.

Date Of Judgement:

15/01/1971

Act:

Income Tax, 1922 – S. 26A

Partnership Act, 1922 –  S. 58, 59, 69-Rule 2(b)

Facts: 

A deed of a partnership signed October 6, 1955, established the assessee firm. It was scheduled to go into force on November 5, 1954. The assessee applied for firm registration under section 26A of the Act for 1956-57. The firm’s prior year was shown as ending on October 26, 1955. On October 14, 1955, the Income-tax Officer received the application. The assessee submitted a statement under section 58 of the Indian Partnership Act, 1932, with the Registrar of Firms on October 20, 1955. The Registrar of Firms filed the assessee’s statement and made entries in the register of firms on November 2, 1955. The Income-tax Officer issued an order on March 23, 1961, and refused to register the company under s. 26-6A, citing, among other things, the fact that the application had not been submitted on time. The Appellate Assistant Commissioner’s appeal was dismissed. The Tribunal also supported the decision of the lower courts. The High Court ruled in favor of the assessee, holding that on the date the application is filed, the partnership should be considered registered and the rules would be satisfied if the partnership was registered under the Partnership Act after s.26A application was filed. 

Issue: 

The underlying question is whether a partnership’s registration under the Partnership Act results on the day the application for registration is filed under section 58 of the Act.

Ratio Of The Case: 

A partnership is registered under the Partnership Act when the requisite entry is made in the register of firms, according to Ram Prasad v. Kamta Prasad. Even under the Partnership Act’s section 69, which addresses the repercussions of non-registration, it has been decided repeatedly that a firm’s registration did not resolve the problem after a complaint was filed.

Kerala Road Lines Corporation v. Commissioner of Income-tax, – a firm cannot be considered as registered when The Registrar receives the statement required by sections 58 and 59 of the Indian Partnership Act. The case has been referred to the Supreme Court for further hearing in January. 

Decision Of The Court: 

The appeal is granted, and the High Court’s decision is reversed. The answer to the referred question must be approbative and adverse to the assessee. In this Court, the appellant is entitled to costs.

The case analysis has been done by Shruti Bose, a student of Christ (Deemed to be University), Lavasa

The case analysis has been edited by Shubham Yadav, a student at Banasthali Vidyapith, Jaipur.

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