JUDGMENT

1. At the instance of Messrs. S. A. Rahim Maula Bakhsh Muhammad Sharif, assessee, the Income-tax Appellate Tribunal has, under section 66(1) of the Income-tax Act, referred the following question of law to this Cour :

"Whether in the circumstances of the case, the application of the assessee firm for registration under section 26A was rightly refused on the ground that the shares of the individual partners constituting the assessee firm were not specified in the instrument of partnership dated the 10th of March, 1951, which was sought to be registere ?"

2. According to the statement of the case there is no controversy about the facts giving rise to this reference. On the 10th of March, 1951, the firm S. A. Rahim and Co. and the firm Haji Maula Bakhsh Muhammad Sharif entered into a partnership.

Each component of this larger firm is a partnership constituted under an instrument of partnership specifying the names and the individual shares of the partners in their respective partnerships concerns. In the instrument of partnership of the assessee firm, neither the names nor the individual shares of the partners of the component firms, viz., S. A. Rahim and Co. and Haji Maula Bakhsh Muhammad Sharif, are specified; the said firms are mentioned as the two partners with equal shares in the partnership.

Under the Partnership Act two firms cannot form a partnership, but for the purposes of assessment of income-tax it has been uniformly held that such a partnership is valid on the premise that in reality the larger partnership is between the individual members of the component firms. On this point there is no dispute between the parties before us. The assessee firm applied for its registration under section 26A of the Income-tax Act, but Mr. Maratab Ali, the Income-tax Officer, refused it on the ground that the shares of the individual partners constituting the assessee firm were not specified in the instrument of partnership as required under that section. On appeal by the assessee, Mr. Zafar Ahmad, the Appellate Assistant Commissioner, profoundly differed with the order of the Income-tax Officer and used strong language for the obduracy of Mr. Maratab Ali in not following the footsteps of his predecessors who had on more than one previous occasion registered the assessee firm under the same constitution.He then cited a departmental instruction that although a firm cannot enter into partnership with another firm, yet when two firms enter into a partnership, the larger partnership will be treated as one constituted by the members of the two firms, and that if registration is applied for, it should be allowed, provided the firms entering into partnership are also constituted under instruments of partnership specifying the individual shares of the partners. Some observations of their Lordships of the Allahabad High Court in Messrs. Chandrika Parsad Ram Swarup v. Income-tax Commissioner were reproduced at length without appreciating that it was a case which dealt with the legality of a partnership constituted between two firms and had nothing to do with the registration of such a firm under the Income-tax Act. As noticed above, in the assessment of the assessee firm the Income-tax Officer had declined to register it because the instrument of partnership and the application for registration did not comply with the requirements of section 26A and the rules prescribed under it. On further appeal by the Commissioner of Income-tax, the Income-tax Appellate Tribunal agreed with the view of the Income-tax Officer and upheld his order refusing registration of the assessee firm.

Now section 26A, under which firms are registered for purposes of income-tax, is mandatory on the point that in the instrument of partnership sought to be registered the names and the individual shares of partners must be specified. The application for registration is to be made in accordance with the rules prescribed. A form of the application is appended to rule 3 in wh