DULICHAND LAKSHMINARAYAN versus THE COMMISSIONER OF INCOME-TAX, NAGPUR.

Citation: [1956] 1 S.C.R. 154 · Decided: 17-02-1956 · Supreme Court of India · Bench: SUDHI RANJAN DAS · Disposal: Dismissed

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Judgment (excerpt)

7956 
February 17 
154 
SUPREME COURT REPORTS 
DULICHAND LAKSHMIN ARA YAN 
v. 
[1956] 
THE COMMISSIONER OF INCOME-TAX, 
NAGPUR. 
[S. R. DAS, C.J., BHAGWATI and VENKATARAMA 
AYYAR, JJ.] 
Indian Income Tax Act, 1922 (Act XI of 1922), s. 26·A and 
2( 6·B)-Indian Partnership Act, 1982 (Act IX of 1982), s. 4-Regis· 
tration of an unregistered firm constituted under a deed of 
partnership-Five con&tituent parties-Three separate firms consti .. 
tuted under three separate deeds of partnership-Sianaturcs on 
deed by three different persons on behalf of three firms.respec-
tively-Fourth party a Hindu undivided family of which karta 
put the signature on deed-Fifth party an individual-Whether 
registration of 8'tch afirm competent under s. 26-Aof Indian In· 
come Tax Act, 1922-Firm and partnership-Definitions of-Indian 
Partnership Act, 1982, s. 4-Firm-Firm name-Partnership-
Partner-Meanings of-Partnership, general concept of-Word "per· 
sons" ins. 4-Meaning of-Firm-Whether a person and whether 
entitled to enter into partnership with another firm or Hindu un· 
dividedfamily or individuals. 
In connection with the assessment for the assessment year 
1949·1950 of Dulichand Lakshminarayan an unregistered firm, an 
application was made under s. 26· A of the Indian Income-Tax Act, 
1922 before Income-Tax Officer,Raigarh, for its registration as a firm 
constituted under a Deed of Partnership dated 17th February, 1947. 
In the opening paragraph of the deed the names and descriptions of 
the five parties thereto were set out. The signatures of five per· 
sons were appended on behalf of five parties respectively at the foot 
of the deed. 
It was common ground that out of the five constituent parties, 
D.L., J.H., and L.C., were separate firms constituted under three 
separate deeds of partnership. The three different 'persons who 
signed the deed on behalf of those three firms respectively were 
partners in their respective firms. 
The fourth party M.B. was the 
na.me of a. business carried on by a Hindu undivided family of which 
the person who signed it was the karta. 
The fifth party M.G. was 
e.n individual. 
The Income-Tax Officer rejected the application on the ground 
that Dulichand Lakshminarayan, constituted under the deed dated 
17th February 1947, consisted of three firms, one Hindu undivided 
family business and one individual and that a firm or a Hindu 
undivided family could not as such enter into a partnership with 
other firms or individual. 
S.C.R. 
SUPREME COURT REPORTS 
155 
1956 . 
The assessee's appeal to the Appellate Assistant Commissioner 
was dismissed but it succeeded before the Income Tax Appellate 
Tribunal who directed registration of the firm. 
On the application 
Dulichand 
of the Commissioner of Income Tax under s. 66(1) of the Income Lakshminarayan 
Tax Act the High Court held that on the facts of the case the asses-
v.. . 
see was not entitled to registration under s. 26-A of the Income Tax The Commissioner 
Act. 
On appeal to the Supreme Court: 
0/ Income Tax, 
Held that a perusal of the deed would indicate beyond any 
Nagpr1r 
doubt that the intention of the parties quite clearly was that each 
of the three constituent firms and not the particular member of each 
of the said three firms who had signed the deed for his respective 
firm was to be the partner in the bigger firm constituted under this 
deed. 
The contention that only the five individual executant of the 
deed were the partners of the newly created firm was against the 
tenor of the deed and was therefore without force. 
Section 26-A of the Indian Income Tax Act postulates the 
existence of a firm. 
The Act, however, does not indicate what a 
firm signifies or how it is to be constituted. 
Section 2(6-B) of the Act clearly provides, inter alia, that 
"firm" and "partnership" have the same meaning respectively as 
they have in the Indian Partnership Act, 1932. 
Section 4 of the Indian Partnership Act (which gives the defini-
tions of "partnership", "partner", "firm" and "firm name") clearly 
requires the presence of three elements namely (1) that there must be 
an agreement entered into by two or more persons: (2) that the 
agreement must be to share the profits of a business; and (3) that 
the business must be carried on by all or any of those persons acting 
for all. 
The general concept of partnership according to both systems of 
law, English as well as Indian, is that a firm is not an entity or 
"person" in law but is merely an asso

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