COMMISSIONER OF INCOME TAX PATLALA versus M/S. JAGANNATH PYARELAL

Citation: [1985] SUPP. 2 S.C.R. 735 · Decided: 29-08-1985 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Appeal(s) allowed

Judgment (excerpt)

. ,,. 
735 
COMMISSIONER OF INCOME TAX PATlALA 
v. 
M/S. JAGANNATll PYARELAL 
AUGUST 2 9, 1985 
[ SABYASACllI MUKllARJI AND RANGANATH MISRA, JJ • ] 
Indian Income Tax Act, 1922; Section 26A and Rules 2 and 4 
of Income Tax Rules 1922 -
Registration of firm -
Partnership . 
deed not signed by one of the partners - Application for regis-
tration made beyond prescribed time - Held; Firm not entitled to 
registration. 
The respondent-fiilll had 11 partne~s on 8.10.19.56, ineluding 
Shri Rsbinder Kumar who left Ind1s for abrosd on 29.1.19.59 for 
prosecuting his studies •. A fresh partnership deed was executed to 
that effect on 1.4.19.59. The respondent-firm filed an application 
on 30.9.19.59 for regist.ration of the said firm under section 26A 
of the Indian Income Tax Act 1922. The Tribunal rejected the 
application on the ground that the firm was not genuine and the 
application for registration of partnership firm was not in 
accordance with the rules as Rsbinder Kumar had not signed it • 
In a reference made under section 66(2) of the Act, the 
Higli Court held that the firm was··entitled to be , registered for 
two reasons, namely, (i) that another opportunity should have 
been given to show whether the firm wan actuslly in existence or 
not; 
and (ii) that Rsbinder Kumar 
had acquiesced in the 
constitution of the firm and had accepted the position. 
Allowing the appeals, 
HELD: 
l. I (i) The firm was not entitled to registration 
under section 26A of the Act as it did not fulfil the conditions 
laid down for its registration. [738 A] 
A 
B 
c 
D 
E 
F 
l.(ii) The lsw enjoins that the deed of partnership must be 
G 
signed personally by each partner. Furthermore, Rules 2 and 4 of 
the Income Tax Rules 1922 require that the application for 
registration must be made within a period of six months ·Of the' 
constitution of the firm or before the end of the "previous year" 
of the firm whichever is earlier,. if the firm was constituted in 
that previous year. [738 B] 
H 
736 
SUPREME COURT REPORTS 
[1985] SUPP.2 s.c.R. 
A 
In the instant case, factually neither the deed of partner-
ship was signed by Rabinder Kumar nor was the applicatiun for 
registration in accordance with the Rules, and these findings of 
fact were not negatived by the High Court. Therefore the 
registration of the firm was rightly refused. [737-H, 738 C-D] 
B 
B..c. Mitter & Sons v. ea-<ea<oaer' of me- Tax, Calcutta 
c 
36 I.T.R. P• 194 and llao Bahedqr Jlavulu Subba llao & Ors. v. 
eo-<seiooer of lDcfxE Tax, lladras 30 I.T.R. 163 at page 166, 
relied upon. 
CIVIL APPELLATE JURISDICTION 
1974. 
Civil Appeal 
No. 124 of 
From the Judgment and Order dated 22nd 
February, 
1973 of 
the Punjab & Haryana High Court in Income Tax Reference No. 7 of 
1972. 
AND 
Civil Appeal Nos. 4122-23 of 1985. 
D 
From the Judgment and Order dated 11th July, 1979 of the 
Punjab & Haryana,High Court in Income Tax Cases Nos. 21 and 22 of 
1974. 
' 
C.M. Lodha and Miss A. Subhashini for the Appellant. 
E 
P.K. Mukharjee for the Respondent. 
F 
The Judgment of the Court was delivered by 
SABYAsAcl!l MUKHARJI, J, Special leave is granted in the 
above-mentioned two Petitions. 
These appeals by special leave arise out of a decision and 
judgment of the Punjab & Haryana High Court in respect of the 
assessment year 1960-61, under Indian Income Tax Act, 1922 
holding that the registration of the firm was wrongly refused. A 
reference was made under section 66(2) of the Indian Income-Tax 
G 
Act, 1922 to thr High Court in respect of the following question: 
"Whether on the facts and in the circumstances of the 
case, the registration of the firm has rightly been 
refused?" 
H 
Originally there were 10 partners who were members of two 
C.I.T. v. JAGM't;A'ffi [SABYASACHI MUKl:AIWI, J.] 
737 
farr1ilies and a firm came into existence under the instrument 
A 
dated 27 .3 .1952, when Fadam Kumar was a minor. When he attained 
majority on 1.10.1956, he opted to continue as a full-fledged 
partner and a fresh instrUII!ent of partnership was 
exec~ted on 
8.10.1956 by 11 partners including Shri Rabinder Kumar. A fresh 
deed was executed to that effect on 1.4.1959 and an application 
dated 2.9.1959 for registration of the said firm under section 
E 
26-A of the·said Act w•s filed on 30.9.1959. Shri Rabinder Kumar 
had left Indian for United States- of America for prosecuti.ng his 
studies on 29.1.1959. It was found by the Tribunal that Rabinder 
Kumar had not signed the application bu

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