The registration of a partnership firm should not be refused if only one of the partners is found to be a benamidar.

( 1 ) IN this reference under Section 66 (1) of the Indian Income-tax Act, 1922, the question of law which is referred to this court is as follows:" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that renewal of registration under Section 26a of the Indian Income-tax Act, 1922, was wrongly refused to the firm for the assessment years 1958-59, 1959-60 and 1960-61 ? "

( 2 ) BY a deed of partnership executed in September, 1950, a partnership consisting of Sri B. M. Kharukha and Mrs. Kharukha, niece-in-law of Sri B. M. Kharukha, and Sri K. A. Choudhury was constituted. Each of the said three partners under the said deed had equal shares of the profit and loss of the firm. The firm was duly granted registration under Section 26a of the Indian Income-tax Act, 1922, for the assessment years 1952-53 to 1957-58. For the assessment year 1958-59, the Income-tax Officer refused renewal of registration to the firm on the ground that the partnership firm was not genuine and that Sri K. A. Choudhury was not a real partner. On his refusal to renew registration the assessee appealed against the said order to the Appellate Assistant Commissioner who remanded the case to the Income-tax Officer for making further enquiry and for submitting a report on the evidence adduced by the assessee. The Income-tax Officer duly complied with the said order and submitted his remand report. The Appellate Assistant Commissioner, after examination of the remand report, also came to the conclusion that Sri K. A. Choudhury was merely a name-lender and could not be a real partner and, as such, he confirmed the order of the Income-tax Officer on the ground that the firm was not genuine. On the same ground the Income-tax Officer and the Appellate Assistant Commissioner also refused to renew the registration of the firm for the assessment years 1959-60 and 1960-61. The Tribunal heard the assessee's appeal in respect of the assessment year 1958-59 and, relying on Commissioner of Income-tax v. A. Abdul Rahim and Co. , held that registration has been wrongly refused to the assessee-firm and on that ground allowed the appeal and directed the Income-tax Officer to grant renewal of registration to the firm for the assessment year 1958-59. Following its own decision, it has also passed the same order in respect of the two subsequent years.

( 3 ) MR. Pal, on behalf of the revenue, has contended that the Tribunal has wrongly applied the principles of law laid down in Commissioner of Income-tax v. A. Abdul Rahim and Co. , to the facts of the present case. According to him the Supreme Court has only decided that the registration of a partnership firm should not be refused if only one of the partners is found to be benamidar. In the present case the income-tax authorities have not refused registration on the ground that Mr. K. A. Choudhury was a benamidar. He has particularly drawn our attention to the following observations of the Supreme Court in the said decision at page 658 :"it is true that different considerations may arise, if the partnership is only between two persons of whom one is a benamidar of the other. In that event the partnership may be bad not because the benamidar has no power to enter into the partnership but because the partnership in law is the relationship between at least two persons and in the case of a benamidar and the real owner in fact there is only one person. It may also be that in a case where a benamidar is taken as a partner with the consent of the other partners, he will only be a ' dummy '. We do not propose to express any final opinion on the said two questions, as they do not arise in this appeal. "

( 4 ) RELIANCE has also been placed by him on R. C. Mitter and Sons v. Com missioner of Income-tax, [1959] 36 I. T. R. 194 (S. C.) in support of the contention that:" In order that a firm may be entitled to registration under Section 26a of the Act, the following essential conditions mu