LexN. T. PATEL AND COMPANY versus COMMISSIONER OF INCOME-TAX, MADRAS
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•• r 1 · S.C.R. SUPREME COURT REPORTS 25i N. T. PATEL AND COMPANY v. COMMISSIONER OF INCOME-TAX, MADRAS. (J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, JJ.) Income Tax-Partnership-Registration of-Shares of part- ners in profit and loss not specified-Refusal of registration, if proper-Indian Income-tax Act, r922 (II of r922), s. 26A. A partnership consisting of four persons was formed on March 3r, r949, which was to come to an end on March 3r, r954. On July 27, r95r, a fifth partner was taken into the partnership. On March 29, r954, a r.ew partnership was enter- ed into taking in a sixth partner who contributed Rs. 40,000 as his share to the capital. In the partnership deed no express provision was made as to the manner in which profits and losses were to be divided. A deed of rectification was executed on September r7, r955, after the close of the account year r954-55, adding a clause to the partnership deed that the partners shall share in the profits and losses in proportion to their contributions to the capital. Upto the end of the assessment year r954-55, the old firms were registered under s. 26A of the Income-tax Act. The new firm applied for registration for the assessment year 1955-56, but registration was refused on the ground that there was no specification of shares of the partners. Held, that registration was rightly refused. Section 26A requires that for registration in a particular year there must be an instrument of partnership specifying the shares of the part- ners in the profits and losses. Though in the present case. there was an instrument of partnership in the year of assessment 1955-56, it did not specify the shares. The right of registration can be claimed only in accordance with s. 26A and the assessee must bring himself strictly under the terms of that section. Ravula Subba Rao v. The Commissioner of Income-tax, Madras, [r956] S.C.R. 577 and R. C. Mitter & Sons v. Commis- sioner of Income-tax, [r959] 36 I.T.R. r94, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 424of1960. Appeal from the judgment and order dated March 25, 1958, of the Madras High Court in case Referred No.62ofl957. · A. V. Viswanatha Sastri, J.B. Dadachanji, Ramesh- war Nath andP. L. Vohra, for the appellant. z96r March r3. N. T. Patel & Company v. Commissioner . of Income-tax, Madras Kapuy ]. 252 SUPREME COURT REPORTS [1962] H. N. Sanyal, Additional Solicitor-General of India, K. N. Rajagopala Sastri and D. Gupta, for the respon- dent. 1961. March 13. The Judgment of the Court was delivered by KAPUR, J.-This is an appeal against the judgment and order of the High Court of Judicature at Madras. The assessee is the appellant and the Commissioner of Income-tax is the respondent. A partnership consisting of four persons was form- ed by a deed of partnership dated March 31, 1949. On July 27, 1951 another partner was taken into partner- ship and a new deed was drawn up. The previous partnership deed was considered as the principal deed. The new partnership like the old one was to end on March 31, 1954. On March 29, 1954, a new partner- ship was entered into and a sixth partner was taken and a new deed was executed. The new partner con- tributed Rs. 40,000 as his share to the capital but in the partnership deed no express provision was made as to the manner in which profits and losses were to be divided between the partners. In order to rectify this, a deed of rectification was executed on Septem- ber 17, 1955, which was after the close of the account year 1954-55. This deed recited that an error had crept in in typing the partnership deed dated March 29, 1954 by omitting to type cl. 21 of the old partner- ship deed in the new deed. The parties had there- fore agreed to rectify the error by adding cl. 20-A as follows:- "We hereby agree that for purpose of clarification the following clause shall be added as clause 20-A in the Partnership Instrument, dated 29th March, 1954:- "The parties shall be entitled to shares in the profits and losses of the firm in proportion to the contribution of the capital of each of the partners ·and whenever fresh capital is required for the busi- ness, each partner shall be liable to contribute the additional capital in the same proportion as the ' . t 1 - . . 1 S.C.R. SUPREME COURT REPORTS 253 paid up capital referred to in clause 4 of the deed, dated 29th March 1954"." This is signed by all the part
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