The main legal point established in the judgment is that the jurisdiction of the Income tax Officer is confined to ascertaining whether the application for registration is in conformity with the rules and whether the firm shown in the document presented for registration is genuine and valid.

1. This is a reference by the Income tax Appellate Tribunal, Madras Bench, under S.66 (1) of the Indian Income tax Act, 1922. The question referred reads as follows:

"Whether on the facts and in the circumstances of the case, the assessee firm should have been granted registration under S.26A of the Income-tax Act, 1922, for the assessment year 1961-62?"

2. S.26A consists of two sub-sections. Sub-section (1) provides:

"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 partners, for registration for the purposes of this Act and of any other enactment for the time being in force relating to income-tax or supertax"; and sub-section (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."

3. R.2 to 6B of the Indian Income tax Rules, 1922 framed by the Board of Inland Revenue in exercise of the powers conferred by S.59 of the Indian Income tax Act, 1922 deal with the registration of firms. Kanga sums up the conditions of registration embodied in those rules as follows:

"(1) On behalf of the firm an application should be made to the Income tax Officer by such persons and at such times and containing such particulars and being in such form and verified in such manner as are prescribed by the Rules.

(2) The firm should be constituted under an instrument of partnership.

(3) The instrument must specify the individual shares of the partners.

(4) The partnership must be valid and genuine and must actually exist in the terms specified in the instrument."

(The Law and Practice of Income tax, 4th Edition, Volume I, page 647)

4. These provisions make it clear that the jurisdiction of the Income tax Officer is confined as stated by the Supreme Court in Commissioner of Income-tax v. Sivakasi Match Exporting Co. (1964) 53 I. T. R.204 and in Commissioner of Income tax v. A. Abdul Rahim & Co. (1965) 55 I. T. R.651 to the ascertaining of two facts, namely, (1) whether the application for registration is in conformity with the rules made under the Act, and (2) whether the firm shown in the document presented for registration is a bogus one or has no legal existence. In the former case the Supreme Court said:

"A combined effect of S.26A of the Act and the rules made thereunder is that if the application made by a firm gives the necessary particulars prescribed by the rules, the Income-tax Officer cannot reject it, if there is a firm in existence as shown in the instrument of partnership. A firm may be said to be not in existence if it is a bogus or not a genuine one, or if in law the constitution of the partnership is void. The jurisdiction of the Income tax Officer is, therefore, confined to the ascertaining of two facts, namely (1) whether the application for registration is in conformity with the rules made under the Act, and (ii) whether the firm shown in the document presented for registration is a bogus one or has no legal existence."; and in the latter:

'It is settled law that if a partnership is a genuine and valid one, the Income tax Officer has no power to reject its registration if the other provisions of S.26A of the Act and the rules made thereunder are complied with."

5. The Partnership Deed is reproduced as Appendix A to the Statement of the Case. The Tribunal does not find that the partnership was not genuine and valid, or that there has been any non-compliance with the provisions of the Act and Rules.

6. The two reasons mentioned by the Tribunal for the refusal of registration are the non-maintenance of accounts and the non-payment of interest on a sum of Rs. 25,000/-advanced to the firm by one of its two partners. Neither of the reasons stands scrutiny.

7. The firm has been assessed as an unregistered