Judgment

HIDAYATULLAH J. : The Commissioner of Income-tax has filed this appeal, with special leave, against the judgment and order of the High Court of Bombay, by which the High Court answered two questions referred to it in favour of the respondents, Messrs. Dwarkadas Khetan & Co., Bombay. These questions were :

"(1) Whether the instrument of partnership dated 27-3-1946 created a deed of partnership?

(2) If the answer to question No. 1 is in the affirmative, whether the fact that on 1-1-1946 there was no firm in existence would be fatal to the application for registration of the firm under S. 26A of the Indian Income-tax Act or whether the firm could be registered with effect from 26-3-1946 if it is held that the firm was genuine?"

2. Prior to 1st January 1945, there was a firm called Dwarkadas Khetan & Co. on that date, the firm ceased to exist, because the other partners had previously withdrawn and it came to be the sole proprietary concern of Dwarkadas Khetan. On 12th February 1946. Dwarkadas Khetan obtained the selling agency of Seksaria Cotton Mills, Ltd. On 27th March 1946, he entered into a partnership with three others by an instrument of partnership executed that day. Those three others were Viswanath Purumul, Govindram Khetan and Kantilal Kasherdeo. Dwarkadas Kehtan s share in the partnership was 7 annas in the rupee, while the remaining 9 annas in the rupee, while the remaining 9 annas share was divided equally among the three others. Though Kantilal Kasherdeo was a minor, he was admitted as a full partner and not merely to the benefits of the partnership, as required by S. 30 of the Indian Partnership Act. To the instrument of partnership, Kantilal Kasherdeo was also a signatory, though immediately after his signature there was the signature of one Kasherdeo Rungta, the natural guardian of the minor. In the instrument, Kantilal Kasherdeo was described as a full partner entitled not only to a share in the profits but also liable to bear all the losses including loss of capital. It was also provided that all the four partners were to attend to the business, and if consent was needed, all the partners including the minor had to give their consent in writing. The minor was also entitled to manage the affairs of the firm, including inspection of the account books and was given the right to vote, if a decision on votes had to be taken. In short, no distinction was made between the adult partners and the minor, and to all intents and purposes, the minor was a full partner, even though under the partnership law he could only be admitted to the benefits of the partnership and not as a partner.

3. The deed of partnership was produced before the Registrar of Firms showing the names of the four partners. The Registrar of Firms granted a registration certificate, and in the certificate Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the partnership. Banks were also informed about the four partners, and it does not appear that to them intimation was sent that one of the named partners was a minor. Though the partnership came into existence on 27th March 1946, the firm was stated to have started retrospectively from 1st January 1946. It may be pointed out that the firm has the Calendar year as its account year, and the matter before us refers to the account year, 1946 corresponding to the assessment year, 1947-48.

4. For purposes of that year registration of the firm was sought under S. 26A of the Indian Income-tax Act. The Income-tax Officer refused to accord registration on the ground that a minor had been admitted as a partner contrary to law, and that the deed could not, therefore, be registered. The appeal to the Appellate Assistant Commissioner also failed, the Commissioner holding that registration could only be of a legal or valid document and not of a document which was invalid in law. An appeal was then taken to the Tribunal, and it was contended that the document must be c