C.I.T. v. Jayalakshmi Rice Mills

365 **A** **€0MMISSIONER** **OF** **INCOME-TAX,** **ANDHRA** **PRADESH,** **HYDERABAD** _v ._ **.JAYALAKSHMI RICE** **AND** **OIL MILLS CONTRACTOR CO.** _January_ 15, 1971 **B** ##### c **D** E ### [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). _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_ F 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. G # - • 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 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 G 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 A B #### c **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. **D** The facts are not in dispute. 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 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 Registrar 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 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 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 ... . 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 <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 provides 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 (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 registration 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 ...... .. 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 statement. 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 support 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 E under our consideration but it throws light on what was contemplated 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_ E Inco~·tax, _Kerala(_ _[8]_ _),_ clearly expressed the view that reading SS. 58 and 5c; of the Indian Partnership Act together a firm,cannot 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. G G ###### 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 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 purpose 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. For the reasons given above the apPeal is allowed and the ##### c 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 .