COMMISSIONER OF INCOME-TAX, AHMEDABAD versus A. ABDUL RAHIM & CO., BARODA

Citation: [1965] 2 S.C.R. 13 · Decided: 04-11-1964 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

13 
A 
COMMISSIONER OF INCOME-TAX, AHMEDABAD 
c 
D 
F 
G 
ll, 
A. ABDUL RAHIM & CO., BARODA 
November 4, 1964 
[K. SUBBA RAo, J.C. SHAH AND s. M. SIKRI, JJ.] 
lnrome Tax Act, 1922, Section 16A registration of partnership--More 
tha itwo partners-Otherwise genuine-Whether can be refused registration 
w!wn one partner is benamidar. 
Benamidar-Status of-If trustee of the real owner. 
A partnership consisting of three partners was reconstituted to take in 
a 4th partner who was a nephew of, and wa• given a part out of his own 
share by, one of. the existing partners. The application by the new part· 
nership firm for registration under s. 26-A of the Income-tax Act, 1922, 
was rejected by the Income-tax Officer on the ground that as the new 
partner was a benamidar, the partnership was not a genuine one. The 
Appellate Assistant Commissioner, the Appellate Tribunal and the Hi~ 
Court, all took the view that the new partnership agreement was valid m 
law and the fact that one of the partners was a benamidar of another was 
not a sufficient ground for refusing to register the firm. 
It was contended on behalf of the Revenue that apart from the fact 
that the 4th partner was a dummy and therefore the new partnership was 
not a genuine one, the actual share of the old partner was not what was 
otated in the agreement but was the total of his apparent share and that 
of the benamidar; to this extent the agreement did not contain a correct 
1P<Cilication of the individual shares of partners as required under s. 26-A 
and registration was, therefore, rightly rejected. 
HELD : (dismissing the appeal) 
(i) When a firm makes an application under s. 26-A of the Act for 
registration, the Income-tax Officer can reject the application if he comes 
to the conclusion that the partnership is not genuine or the instrument of 
partnership has not specified correctly the individual shares of the partners. 
But once he comes to the conclusion that the partnership is a genuine and 
nlid one, he cannot refuse registration on the ground that one of the 
partners is a benamidar of another. If the partnership is genuine and 
legal, the share given to the benamidar will be correct specification of his 
individual share in the partnership. The beneficial interest in the income 
pertaining to the share of the said benamidar may have relevance to the 
matter of assessment, but non in regard to the question of registration. 
[210.F] 
R. C. Mitter &: Sons v. C.J.T., Calcutta, (1959) Supp. 2 S.C.R. 641; 
Cl.T. Madras v. Slvakasi Match Exporting Co., (1964) 53 I.T.R. 204; 
Sir Sunder Singh Majithia v. Cl.T. C.P. &: U.P., (1942) 10 I.T.R. 457, 
referred to. 
ed. The Central Talkies Circuit, Malunga, (1941) 9 LT.R. 44, consider· 
.Hirana".d Ramsukh \•. C.l.T., Hyderabad, (1963) 47 I.T.R. 598; P. A. 
B 
R<11u Chet11ar v. C.I.T., Madras, (1949) 17 I.T.R. 51, distinguished. 
(ii) A benamidar is a mere trustee of the real owner and has no 
~eneficial interest in the property or the business of the real owner. As 
111 the case of a trustee, he possesses the legal character to enter into a 
14 
SUPREME COUllT REPORTS 
[1965) 2 S.C.R. 
partnetship with another, 
and the fact that he is accountable for his 
A 
profits to, and has a right to be indemnified for his losses by, a third 
party or even by one of the partners does not disgorge him to the said 
character. 
[190-E, G-H) 
Gur Narayan v. Sheo Lal Singh, (1918), L.R. 46 I.A. I, Aruna Group 
of Estates, Bodinayakanur v. State of Madras, (1962) 2 M.L.J 264, refer-
red to. 
B 
.CIVIL APPELLATE JURISDICTION : Civil Appeal No. 982 of 
1963. 
Appeal from the judgment and order, dated April 4, 5, 1961 
of the Gujarat High Court in Income-tax Reference No. 8 of 1960. 
K. N. Ra;agopala Sastri and R. N. Sachthey, for the appellant. c 
T. A. Ramachandran and 0. C. Mathur, for the respondent. 
The Judgment of the Court was delivered by 
Subba Rao, J. 
This appeal by certificate raises the question 
whether the Income-tax Officer can refuse to register a genuine 
D 
partnersliJp entere.d into between more than 2 oersons on the 
ground that one of them is only a benamidar for another. 
The relevant facts may briefly be stated. 
Three persons by 
name Abdul Rahim Valibhai, Abdulla Rehman and Abdul Rahim 
Malanghbhai, constituted a partnership having 9 annas, 5 annas E 
and 2 annas share respectively. The said partnership was carrying 
on business in goat and sheep skins. From the beginning of Samvat 
year 2012 (15-11-1955
Excerpt shown. Read the full judgment & AI analysis in Lexace.