The main legal point established in the judgment is that for a business succession under Section 26(2) of the Indian Income Tax Act, the business must be the same and not just of the same nature, and the individual shares of the partners must be specified in the instrument of partnership for registration under Section 26-A.

1. The questions propounded are:

(a) Whether on the facts of this case the assessee firm did succeed to the business of the individual partners within the meaning of Section 26(2) of the Indian Income Tax Act? and

(b) whether a firm constituted under a registered deed of partnership of which one member is a firm is not entitled to be registered as a firm for the purpose of Income Tax merely because while specifying the individual share of the profits and losses the instrument does not specify the shares inter se of the partner firm.

2. Prior to the 31st August, 1933, a firm called M.K. Naicker & Sons was supplying labour to the Madras Port Trust under a contract which expired on the 31st August, 1933, and M. Raju Naicker and R. Govindarajulu Naicker in partnership had a similar contract with the Madras Port Trust which also expired on the same date. The labour under the contract was supplied by the former partnership M.K. Naicker & Sons to two godowns belonging to the Madras Port Trust and by the latter partners to two other godowns also belonging to the Madras Port Trust. Until 1933-1934 the family represented by M.K. Naicker & Sons which was an undivided family and the firm consisting of M. Raju Naicker and R. Govindarajulu Naicker were separately assessed. The managing member of the former firm had for many years been supplying labour to the Madras Port Trust under similar contracts. When the before-mentioned contracts were about to expire, the Port Trust, contrary to their previous practice, decided to call for tenders for the supply of labour for a period of five years from September, 1933, the previous practice having been to grant contracts without calling for tenders. M.K. Naicker & Sons and the other partnership decided to tender jointly for this contract in pursuance of an informal agreement entered into between them on 3rd July, 1933, in which it was agreed that if the tender should be accepted by the Port Trust, 50 per cent, of the profits and losses would be allotted to M.K. Naicker & Sons, 25 per cent, to Raju Naicker and 25 percent, to Govindarajulu Naicker and that an acceptance of the tender a detailed partnership agreement would be executed and registered. These persons succeeded in getting the contract and accordingly jointly supplied labour to the four godowns of the Madras Port Trust which they had previously done individually and on the 21st December, 1934, executed a deed of partnership in respect of a firm styled M.K. Naicker & Co., the present petitioners M.K. Naicker & Sons, consisting of four partners, being called the partners of the first part and Raju Naicker and Govindarajulu Naicker partners of the second and third part respectively, and their shares in the profits and losses were specified as follows: M.K. Naicker & Sons 7 annas in the rupee; Raju Naicker 5 annas in the rupee and Govindarajulu Naicker 4 annas in the rupee. Under the document the partners who are described as three in number agreed to carry on the labour supply to the Madras Port Trust in pursuance of an agreement made by M.K. Naicker & Co., with the latter dated 5th September, 1933. Subsequently M.K. Naicker & Co. applied to the Income Tax Officer for the registration of the firm under Section 26-A of the Act filing the instrument of partnership already referred to dated the 21st December, 1934. This application was refused on the ground that the instrument of partnership did not specify the shares of the partners in the partnership. This point will be dealt with when we come to consider question (b) and as regards question (a) some further facts must be stated and they are that for the assessment of the year 1934-1935. M.K. Naicker & Sons filed a return showing the income of the labour supply business carried on by them during the period 1st January, 1933 to 31st August, 1933, the date on which their independent contract with the Port Trust expired, contending that the labour supply business carried on by them had been di