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1978 Supreme(Cal) 627
High Court Of Calcutta
Dipak Kumar Sen, Sudhindra Mohan Guha
COMMISSIONER OF INCOME-TAX - Appellant
Versus
R.S.SINGH AND CO. - Respondent
Income-Tax Reference 87 Of 1972
Decided On : 11/24/1978
B.L.PAL, N.L.PAL, P.K.PAL, Sidhartha Chatterjee
A partnership deed should be construed as a whole and effect should be given to all parts thereof. The general intention is to be collected from the instrument as a whole and that intention should be inferred from the general form of the deed. The law is anxious to save a deed if possible and if by any reasonable construction the intention of the parties can be arrived at and that intention carried out consistently with the rules of law, the court will take that course.
Headnote:
INCOME TAX ACT, 1961 - SECTION 184 (7) - PARTNERSHIP DEED - INTERPRETATION - HUF AS PARTNER - REGISTRATION OF FIRM - WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE PARTNERSHIP DEED WAS EXECUTED BETWEEN THREE INDIVIDUALS AND NOT BETWEEN TWO INDIVIDUALS AND ONE HUF AND IN THAT VIEW HOLDING THAT THE ASSESSEE-FIRM WAS ENTITLED TO BENEFIT OF REGISTRATION UNDER SECTION 184 (7) OF INCOME-TAX ACT, 1961 ?
Fact of the Case:
The assessee, a partnership firm, was denied registration under Section 184 (7) of the Income Tax Act, 1961, by the Income Tax Officer (ITO) on the ground that it was constituted with two individuals and a Hindu Undivided Family (HUF), which was not permissible in law. The assessee appealed to the Appellate Assistant Commissioner (AAC) and the Tribunal, both of whom upheld the ITO's order.
Finding of the Court:
The Tribunal, on a proper interpretation of the partnership deed, held that the deed was executed between three individuals and not between two individuals and one HUF. The Tribunal also held that the assessee-firm was entitled to the benefit of registration under Section 184 (7) of the Income Tax Act, 1961.
Issues: Whether the Tribunal was right in holding that the partnership deed was executed between three individuals and not between two individuals and one HUF and in that view holding that the assessee-firm was entitled to the benefit of registration under Section 184 (7) of the Income Tax Act, 1961?
Ratio Decidendi: The court held that the Tribunal was right in holding that the partnership deed was executed between three individuals and not between two individuals and one HUF. The court observed that the signatures on the deed were those of individuals signing for themselves and described as partners. The court also noted that the operative part of the deed was unambiguous and the recitals would have no effect. The court further held that the assessee-firm was entitled to the benefit of registration under Section 184 (7) of the Income Tax Act, 1961, as all the conditions laid down in the said section had been duly satisfied.
Final Decision: The court answered the question referred in the affirmative and in favor of the assessee.
( 1 ) THE short facts in this reference are, inter alia, that Messrs. R. S. Singh and Co. , the assessee, is a partnership constituted under a deed dated the 18th May, 1953. The material parts of the said deed are, inter alia, as follows :"partnership deed this Indenture of partnership made this 18th day of May one thousand nine hundred and fifty-three Between 1. Ram Swarth Singh, son of late Dargga Singh, by caste Hindu by profession trader and a contractor at present residing at Kanchrapara within the district of 24 Pgs. Of the first part. And 2. Rambalak Singh Sachidanand Singh, a Hindu undivided family, consisting of Ram Balak Singh and Sachidanand Singh where the karta is Rambalak Singh by caste Hindu by profession a trader and a contractor at present residing at Kanchrapara within the district of 24 Pgs. Of the second part. And 3. Chandradip Singh, son of Sri Sital Singh, by caste Hindu by profession a trader and a contractor at present residing at Kanchrapara within the dist. of 24 Pgs. Of the third part. (All the above persons hereinto, referred to as 'party' which expression, unless repugnant to or inconsistent with the context, shall mean and include their heirs, executors, administrators, legal representatives and assigns ). . . 3. That the partnership shall be at will but shall not be dissolved by death, insolvency or retirement of any partner but shall be carried on by rest of the partners except in case of death of any partner when male heir or legal representative of deceased partner shall be forthwith admitted as a co-partner with all the rights and liabilities of the deceased partner. . . . . 9. That the profits and losses in the said business will be divided among the partners respectively as below : 1. Ram Swarth Singh 0-6-0
2. Rambalak Singh Sachidanand Singh 0-6-0
3. Chandradip Singh 0-4-0
In witness whereof the parties hereto do hereunto set and subscribe their respective hands and seals on the date first above-written. Name and Address of Witness :--Signatures of Partners. Sd. Ram Swarth Singh. Sd. Rambalak Singh. Sd. Chandradip Singh. "
( 2 ) THE assessee had been granted registration in the past assessment years. For the assessment year 1962-63, the relevant previous year being that ended on the 31st March, 1962, the assessee filed a declaration under Section 184 (7) of the I. T. Act, 1961, along with its return of income. The ITO refused registration to the assessee on the ground that the assessee, a partnership, had been purportedly constituted with two individuals and an HUF which was not permissible in law. The ITO came to the aforesaid conclusion relying on the description of the parties in the preamble of the deed as set out hereinbefore.
( 3 ) BEING aggrieved, the assessee preferred an appeal. The AAC upheld the order of the ITO relying on the preamble and the clause dealing with the division of profits and loss which also treated the HUF as a partner and specified its share. He also found that, in the capital account of the assessee, net profits had been credited to the HUF.
( 4 ) THE assessee preferred a further appeal to the Tribunal. It was, inter alia, contended before the Tribunal on behalf of the assessee, that it was the karta, Rambalak Singh, who has entered into the partnership and not the HUF and that the description of the parties in the preamble, if properly read, indicated that it was the individual who was a party to the deed, inasmuch as heirs, executors, administrators, legal representatives and assigns had been included in the description. Clause 3 of the deed, which provided for the death or retirement of a partner, also indicated that the partners were all deemed to be individuals.
( 5 ) THE Tribunal held that, on a proper reading of the deed, it had to be construed that Rambalak Singh, the karta, is a the partner of the firm in in his individual capacity. Whatever be the description in the preamble, it was the karta who had signed the deed
