LexCOMMISSIONER 01'' INCOME-TAX, WEST BENGAL, CALCUITA versus JUGGILAL KAMALAPAT
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COMMISSIONER 01'' INCOME-TAX, WEST BENGAL, A CALCUITA v JUGGILAL KAMALAPAT Ocrober 7, 1966 (J.C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.j Income-tax Act (II of 1922), ss. 26A and 66-Registration of firm- Legal validity of existence of firm--Que.rtion of law referable to lligh Court. B Three brothers and J entered into a partoership busine•. Tho firm C owned both movable and immovable propenies. Later, the three brothers created a Trust, with themselves as the first three trustees. They also exe>- cuted an unregistered deed of relinquishment by which they relinquished their rights in and claims to all the properties and BSSets of •he firm, m favour of J. and of themselves in the capacity of truslees. A new partner- ship firm was constituted between J. and the Trust by means of a part- nership deed which specified the shares of the two partners in the erofiis D and losses. The Trust introduced a sum. of Rs. 50,000 as its capilal tn ILe new firm. For the assessment year 1943-44 the new firm applied fur 1egistration under s, 26A of the Indian Income-tax Act, 1922 but the Income-tax Officer, Appellate Assistant Commissioner and the Appellate Tribunal rejected the application. The Tribunal relied mainly on the ground that the deed of relinquishment being unregistered could not legally transfer the rights and the title to the immovable properlies owned by the original firm, to the Trust and that as the immovable properties were not E separable from the 01her buisiness assets rhere was no legal transfer of any portion of the business assets of the original firm in favour of the Trust. On a reference to the High Court, as to whether the new partnenblp legally came into existence and, as such, should be registered, 1t was conM tended on behalf of the Commissioner that the Tribunal bad recorded a ftnding of fact that the firm seeking registration was not a genuine ane and had never come into existence. The High Court, after canine for further otatements, held that the Tribunal had not recorded any such find- F ing of fact, that the firm did in fact come into existence, and that there was no impediment to its registration. In appeal to this Court, HELD : (i) The existence of a firm could be challenged· on two al'cr· native grounds; (a) that a firm had not come into existence at all, and (b) that though it came into existence in fact, its existence was not valid in law. In the present ease it was only the second question that was r ... ferred to the High Court. The fir.it could not at all be referred to the Hi~h Court as it would be a pure question of fact; and if the Appellalc Tribunal bad in fact recorded a finding of fact that the firm had not come into existence, the question of law referred to the High Court, would not arise at all. Therefore, the new firm did in fact come into existence. (788 E-H) (ii) Tho ·new partner.ihip between the Trust and J. was comtitutcd under a deed which was properly executed, wa.< valid in law. and so the firm should be registered. [791 C-DJ G H A B c C.I.T. v. JUGGILAL KAMALAPAT (Bhargava, J.) 785 The deed of R!linquishment was in respect of the individual interests of the three brothers in the assets of the original firm, in favour of the Trust, and consec;1uently, did not require R!gistration, even though the assets 9f that firm mcluded immovable property. The deed was therefore valid without registration. (790 Fl Addanki Narayanappa v. Bhakara Krishnappa, (1966) 3 S.C.R., 400 followed: Even if the deed of R!Iinquishment required R!gistration, it could only be invalid insofar as it affected immovable properties, but to the extent that it purported to transfer movable assets of the original firm, it would be valid. A deed of relinquishment is in the nature of a deed of gift where the various properties dealt with are separable. In the present case, there- fore, the deed of relinquishment was valid at least in R!spect of movable properties, and the partnership seeking registration thus became owner of all the movable assets of the first partnership in addiiion to the Rs. 50.000 contributed as a capital investment by the Trust. (790 G; 791 A, CJ CIVIL APPELLATE JURISDICTION: Civil Appeal No. 127 of 1966 Appeal from the judgment and order dated December 11, 1962 of the Calcutta High Court in Income-tax Reference No. 47 of D 1962. E F G H S. T. Desai, A. N. Kirpal and R; N. Sachthey, for the app
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