Where a minor has been admitted to the benefits of a partnership, the document evidencing the contract must specify expressly or at least by necessary implication the proportion in which the adult partners are to share the losses, if any, of the firm.

1. - This is a reference under section 256(1) of the Income-tax Act, 1961 (" the Act "), at the instance of the assessee for the decision by this court of the following questions of law, namely:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee-firm was not entitled to registration for the assessment year 1972-73 and continuation of registration for the assessment year 1973-74 due to non-specification of shares in losses in the partnership deed dated October 30, 1971 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that shares in losses were not specified in the partnership deed dated October 30, 1971 ? "

2. This reference initially came up for hearing before a Division Bench when it was indicated at the hearing that a Division Bench decision of this court in Raj Construction Co. v. Addl. CIT [1986] 157 ITR 734 , does not appear to be in consonance with the Supreme Court decision in Mandyala Govindu & Co. v. CIT [1976] 102 ITR 1 . For this reason, the Division Bench referred the matter for decision by a larger Bench. This is how the reference has come up before us for decision of the above questions of law.

3. The material facts are these:

The relevant assessment years are 1972-73 and 1973-74. For the assessment year 1972-73, the assessee applied for registration as a firm on the basis of a partnership deed dated October 30, 1971. It also applied for continuation of registration of the firm for the next assessment year 1973-74 on the same basis. The Income-tax Officer passed an order under section 185(1)(a) of the Act on December 12, 1973, granting the assessee-firm registration for the assessment year 1972-73. For the assessment year 1973-74, the Income-tax Officer continued the registration by order dated March 18, 1975, treating the firm as genuine.

4. The Commissioner, on a perusal of the record on the basis of which the Income-tax Officer had granted and continued registration to the assessee-firm for these years, came to the conclusion that the orders of the Income-tax Officer were erroneous and prejudical to the interests of the Revenue. Accordingly, the Commissioner issued a notice under section 263 of the Act to show cause why the registration granted by the Income-tax Officer should not be cancelled, inasmuch as the partnership deed dated October 30, 1971, on the basis of which registration was claimed did not specify the shares of the partners in the losses of the firm, it may be mentioned here that the partnership evidenced by the deed dated October 30, 1971, comprised of four adult partners, namely, Nevandram, Dhanomal, Kishanchand and Choithram, and Sunderdas, a minor son of Dhanomal, was admitted to the benefits of the partnership on the death of Smt. Isari Bai, a deceased partner. The Commissioner took the view that specification of the shares in the profits as well as the losses was an essential requirement for grant of registration to a firm and since the partnership deed did not specify the ratio in which the losses were to be shared by the adult partners only, the order of the Income-tax Officer granting registration to the firm was erroneous and, therefore, prejudicial to the interests of the Revenue. Accordingly, the Commissioner by his order dated December 10, 1975, cancelled these orders of the Income-tax Officer and directed him to make the assessment in the status of an unregistered firm.

5. The assessee preferred an appeal to the Tribunal which failed. The Tribunal affirmed the view taken by the Commissioner and upheld the cancellation of registration of the assessee as a firm for the assessment year 1972-73 and continuation of registration for the assessment year 1973-74. The Tribunal took this view following the Supreme Court decision in Mandyala Govindu & Co.'s case [1976] 102 ITR 1 . Aggrieved by the decision of the Tribunal, the assessee applied under section 256(1) for a