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PUNJAB & HARYANA HIGH COURT
G.D.Khosla and S.S.Dulat JJ.
Commissioner Of Income-tax
Versus
Kishore Chand Ramji Dass
Income tax Reference No. 4 of 1956,
Decided On : MARCH 3, 1960
INCOME TAX ACT, 1922 - SECTION 33B - PARTNERSHIP FIRM - REGISTRATION - RENEWAL - SHARES OF PARTNERS - SPECIFICATION - INTERPRETATION OF DEED OF PARTNERSHIP - ERROR IN APPLICATION FOR RENEWAL - EFFECT.
Fact of the Case:
A partnership firm consisting of L. Kheta Mal and his five sons was constituted in 1929. In 1947, one of the sons, Balbir Chand, was made to retire from the partnership and his share was allotted to his three minor sons, his second wife, and his minor son by his second wife. The partnership was registered under the Income-tax Act, 1922, and the registration was renewed for the years 1949-50 and 1950-51. However, the Commissioner of Income-tax refused to renew the registration for the year 1951-52, holding that the shares of all the partners were not specified.
Finding of the Court:
The Income-tax Appellate Tribunal held that the Commissioner of Income-tax was not justified in refusing renewal of registration. The Tribunal found that the deed of partnership clearly stated that the three minor sons of Balbir Chand were to share their collective 1/10th share equally. The Tribunal also held that the small defect in the application for renewal, that the shares of the minors and Kaushalia Devi were lumped together, was immaterial because the deed of partnership, which accompanied the application, left no doubt about the exact shares of the partners.
Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the three minor sons of Balbir Chand, viz., Mohinder Pal, Harish Chander and Romesh Chander, were to share their collective 1/10th share equally? 2. Whether, on the facts and in the circumstances of the case, the assessees application for renewal of registration merited rejection on the ground that the shares of Kaushalia Devi and the four minor sons of Balbir Chand were cumulatively shown there as 1/5th.
Ratio Decidendi: 1. The deed of partnership clearly stated that the three minor sons of Balbir Chand were to share their collective 1/10th share equally. This was evident from the context of the deed, which left no doubt about the meaning. 2. The small defect in the application for renewal, that the shares of the minors and Kaushalia Devi were lumped together, was immaterial because the deed of partnership, which accompanied the application, left no doubt about the exact shares of the partners.
Final Decision: The court answered both questions in the affirmative, holding that the Tribunal was justified in holding that the three minor sons of Balbir Chand were to share their collective 1/10th share equally and that the assessees application for renewal of registration did not merit rejection on the ground that the shares of Kaushalia Devi and the four minor sons of Balbir Chand were cumulatively shown there as 1/5th.
DULAT, J.
1. A partnership firm consisting of L. Kheta Mal and his five sons - Kishore Chand, Ramji Das, Dayal Chand, Roshan Lal and Balbir Chand - was constituted in the year 1929. Later, in March 1947, one of the sons, Balbir Chand, was made to retire from the partnership and his share was allotted as follows :
(1) To his three minor sons, Mohinder Pal, Harish Chander and Ramesh Chander, by his deceased first wife : 1/10th.
(2) To his second wife, Smt. Kaushalia Devi : 1/20th.
(3) To his minor son, Surrendar Kumar, by Smt. Kaushalia Devi : 1/20th.
The instrument of partnership was signed by their uncle, Kishore Chand, on behalf of Mohinder Pal, Harish Chander and Romesh Chander, and by Smt. Kaushalia Devi on behalf of her son Surrendar Kumar. It was mentioned in the deed that the minors had been admitted to the benefits of the partnership.
2. In October, 1947, the father, Kheta Mal, died and thereupon another instrument of partnership was executed on the 3rd December, 1947, the shares of the minors being mentioned as :
(1) L. Kishore Chand son of L. Kheta Mal : 1/5th.
(2) L. Ramji Dass son of L. Kheta Mal : 1/5th.
(3) L. Dayal Chand son of L. Kheta Mal : 1/5th.
(4) L. Roshan Lal son of L. Kheta Mal : 1/5th.
(5) Mohinder Pal, Harish Chander and Romesh Chander, minor sons of L. Balbir Chand, through Kishore Chand, their uncle : 1/10th.
(6) Surrendar Kumar son of L. Balbir Chand, through Smt. Kaushalia Devi, his mother : 1/20th.
(7) Smt. Kaushalia Devi wife of L. Balbir Chand : 1/20th.
3. The Income-tax Officer allowed registration of the firm under this deed of partnership for the year 1948-49, and it was renewed for the years 1949-50 and 1950-51. Renewal was also allowed by the Income-tax officer for the next year 1951-52. This matter, however, came to the notice of the Income-tax Commissioner and he, acting under section 33B of the Income-tax Act, set aside the order of the Income-tax Officer granting renewal for the year 1951-52, holding that the shares of all the partners were not specified inasmuch as the shares of Mohinder Pal, Harish Chander and Romesh Chander were not separately mentioned, although their total share in the partnership was specified as 1/10th, and further that in the renewal application, apart from the partnership deed, the share of Shrimati Kaushalia Devi and the shares of Balbir Chands sons were shown together as 1/5th and not separately specified. Against the learned Commissioners order, an appeal was taken to the Income-tax Appellate Tribunal, and that Tribunal found that the reasons mentioned by the Commissioner of Income-tax for refusing renewal of registration were untenable. The Tribunal held that in the context of the relevant facts, there could be no doubt that when the partnership deed stated that Mohinder Pal, Harish Chander and Romesh Chander held 1/10th share in the partnership, it meant that these three minors held that 1/10th share in equal shares. The Tribunal concluded, therefore, that it was not right to say that the shares of these three minors were not specified. On the second matter the Tribunal held that the small defect in the application for renewal, that the shares of the minors and Kaushalia Devi were lumped together and shown as 1/5th of the total partnership, was immaterial because the deed of partnership, which accompanied the application, left no doubt about the exact shares of the partners. The Tribunal was, therefore, of the view that the renewal application was properly allowed by the Income-tax Officer and ought not to have been refused by the Commissioner of Income-tax. The Tribunal allowed the appeal and restored the order of the Income-tax Officer. The Commissioner of Income-tax then applied to the Tribunal to refer two questions of law to this court, and the Tribunal, although feeling that the questions were essentially of fact, agreed to refer the following two questions for decision by this court :
"(1) Whether, on the facts and in the circumstances of th
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