Commissioner of Income-Tax, Andhra
Pradesh, Hyderabad Vs. Jayalakshmi Rice and Oil Mills Contractor Co [1971] INSC
14 (15 January 1971)
GROVER, A.N.
GROVER, A.N.
SHAH, J.C.
HEGDE, K.S.
CITATION: 1971 AIR 1015 1971 SCR (3) 365 1971
SCC (1) 280
CITATOR INFO:
E 1984 SC 684 (34)
ACT:
Income-tax Act, 1922, s. 26A-Income-tax
Rules, r.2(b)--Indian Partnership Act, 1932, ss. 58, 59, 69-Rule 2(b) providing
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 Partnership Act
nor on date of receipt of application under ss. 58 but when entry is made in
register of firms under s.
59-If such an entry is made after end of
'previous year' firm is not registered under the Partners-ship Act for the
purpose of r. 2(b).
HEADNOTE:
The 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. The assessee filed an application under s. 26A 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, 1955. The 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 s. 58 of the 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 s. 26-6A. 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 the 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 law it can be taken to
have been settled by decision,-, 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 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 s. 59 pursuant to it the
registration would be effective from the date when the application was
presented. But s. 58(2) is not to be read in isolation and has to be considered
along with the scheme of 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-G] Ram Prasad v. Kamta
Prasad, A.I.R. 1935 All. 898, Danmal Parshomadas v. Baburam Chhotelal, I.L.R.
[1936] 58 All. 495 and Kerala Road Lines Corporation v. Commissioner of Income-
tax, Kerala 51 I.T.R. 711, approved.
366 (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 purpose of construing the provisions of the Act. [1369B]
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 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 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 assessee filed an application under S. 26A 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, 1955.
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 s. 58 of the Indian Partnership Act 1932. On November 2, 1955 the
Registrar of Firms filed the statement of the assessee and made entries in the registrar
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 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.
Section 26A of the Act provides that an
application may be made to the Income-tax Officer on behalf of any firm
constituted under an instrument of partnership specifying the individual shares
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 367 prescribed. Rules 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) or or where the deed of Partnership
is not registered under the Indian Registration Act, 1908 (XVI of 1908), and
the application for registration is being made for the first time under the
Act, (i) Within a period of six months of the constitution of the firm or
before the end of the 'previous year' of the firm whichever 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 1.932) or where the need of partnership is
registered under the Indian Registration Act (XVI of 1908) before, 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 registered 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 determined
is whether the registration of a firm under the Partnership Act takes place
with effect from the date on which the application for registration is made in
accordance with s. 5 8 of that Act.
Section 5 8 ( 1 ) provides that the
registration of a firm may be effected at any time by sending by post or
delivering to 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 accom- 368 panied by the prescribed fee stating........ Under S. 59 when
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 statement. In Ram Prasad v. Kamta
Prasad(1) it was laid down that the registration of a firm under the
Pertnership Act takes place only when the necessary entry is made in the
register of firms, Even under s. 69 of the Partnership Act which deals with the
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 Chhotelal(2). 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 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 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 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
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. Commissioner of Income-tax, Kerala(1), clearly expressed the
view that reading ss. 58 and 59 of the Indian Partnership Act together a firm
cannot be said to be registered when the statement prescribed by s. 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 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
firm 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
Partnership Act and reference was made in particular to the statement relating
to clause 58 corresponding (1) AIR[1935]Al1.898. (2) I.L.R.[1936] 58ALL.495.
(3) 51 I.T.R. 71 1.
369 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 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.
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 affirmative and against the, assessee.
The appellant shall be entitled to costs in this Court.
G.C. Appeal allowed'.
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