Judgment

GUPTA, J. - This appeal by special leave is directed against an order of the High Court of Andhra Pradesh at Hyderabad answering in the negative and in favour of the revenue the following question referred to it under Sec. 66 (1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act).

"Whether the Assessee is entitled to registration under Section 26A of the Income-tax Act, 1922 for the assessment year 1961-62."

2. The assessee is a firm. The instrument of partnership was executed on January 5, 1959 but the application for registration under Sec. 26A remained undisposed of until the assessment for the year 1961-62 was taken up. The instrument shows that three persons, Mandyala Narayana, Mandyala Vehkatramaiah, Mandyala Srinivasulu and a minor, Mandyala Jaganmohan who was admitted to the benefits of the partnership, held the following shares: Narayana 31 per cent, Venkatramaiah 23 per cent,. Srinivasulu 23 per cent, and minor Jaganmohan 23 per cent. Clause 2 of the instrument which sets out the shares of the partners adds that the "profits of the above partnership business shall be divided and enjoyed according to the shares specified above." There is no clause in the instrument specifying the proportion in which the three adult partners were to share the losses, if any. Having set out all the terms of agreement, the instrument closes with clause 9 which states:

"We (the partners) are bound to act according to the above mentioned stipulations and also according to the provisions of the Indian Partnership Act.......... . . "

3. The High Court was of the view that unless the instrument of partnership specified the shares of the partners not only in the profits but also in the losses, the firm would not be entitled to registration under Sec. 26A, and negatived the contention raised on behalf of the assessee that clause 9 of the instrument indicated how losses were to be apportioned between the partners. The correctness of this decision is challenged by the appellant firm.

4. It is not that a firm to be able to trade must be registered under Sec. 26A. A firm, registered or unregistered is an assessee under the Act and can do business as such. However, registration under Sec. 26A

"confers on the partners a benefit", as would appear from the provisions of Section 23 (5) of the Act, "to which they would not have been entitled but for Section 26A, and such a right being a creature of the statute, can be claimed only in accordance with the statute which confers it, and a person who seeks relief under Sec. 26A must bring himself strictly within its terms before he can claim the benefit of it": Rayulu Subba Rao v. Commr. of Income-tax, Madras, (1956) 30 ITR 163. The question in this case is whether in the absence of a specific statement in the instrument as to the proportion in which the partners were to share the losses, the requirement of Sec. 26A can be said to have been satisfied. Section 26A reads:

"26A. (1) 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 partnors, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax.

(2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form, and be verified in such manner, as may be prescribed; and it shall be dealt with by the Income-tax Officer in such manner as may be prescribed."

The required particulars are specified in Rules 2 and 3 of the Rules framed under the Act and the form of application including the Schedule annexed to Rule 3. Paragraph 3 of the Form requires the partners to "certify that the profits (or loss if any)" of the relevant period were or will be, as the case is; "divided or credited, as shown in Section B of the Schedule". In Section B of the Schedule are to be recorded the "part