PAREKH WADILAL JIVANBHAI versus COMMISSIONER OF INCOME TAX, M. P. NAGPUR AND BHANDARA, NAGPUR

Citation: [1967] 1 S.C.R. 998 · Decided: 28-10-1966 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Appeal(s) allowed

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Judgment (excerpt)

PAREKH WADILAL JIVANBHAI 
I'. 
COMMISSIONER OF L"\"COME-Tl\X, M. P. NAGPUR 
Ai"ID BHANDARA, NAGPUR 
October 28, 1966 
[J.C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.j 
Income-tax Act (11 of 1922), s. 26A-Registration of fimt-Whttlier 
individual shares oj partners specified-Partners/zip deed, construction of. 
Three brothers entered into a partnership in 1949 for doing bu&ne.ss. 
A 
B 
Dause 3 of the partnership deed provided that the capital allotted to each 
putner was equal, and cl. 10 provided that after meeting all the expensCIS, c 
mterest and other charges, the resulting net profit or loss should be ascer-
tained and divided 
amongst all 
the partners. 
Io the assessment year 
1951-52, the three partners applied to the Income-tax Officer for registra-
tion of the firm under s. 26A of the Income-tax Act, 1922 and registration 
was granted. 
For the assessment year 1952-53, the registration was re-
newed on application: 
But for the assessment year 1953-54, the Iocome-
tax Officer refused renewal. 
In all the applications for rcgisrratioo, the 
three partners were sho11w·n to have shared the profirs equally, anJ in their 
D 
account books also, since 1949, the profits have been apportioned equally. 
The ground of refusal by the Jncon1e--tax Officer \Vas, that there was no 
clause in the deed specifying the individual 
share of 
profits of 
each 
partner as required by s. 26A. 
The order was confirmed by tht• Appellate 
; 
Assistant Commissioner, the Appellate Tribunol ond the High Court on 
' 
reference. 
In appeal to this Court, 
HELD : The assessee firm was entitled to b-~ registered under s. 26A 
of the Act for the a=sment year 1953-54 also. 
[1003 DJ 
Although the application for 
registration 
had to be strictly in con-
formity with the section and Rules, in ascertaining whether the application 
was in such conformity the partnership deed has to be reasonably cons-
trued. Reading the partnership deed as a whole in the light of s. 13 of the 
Partnership Act, 1932, and in the contcx.1 of the relevant circumstances 
of the case, there was specificaiion of the individu.11 shares of the three 
partners in the profits and lO";ses namely, that each partner was allotted 
an equal one-third share and there was hence specification of the indivi-
dual shares of the partners within the meaning of the section. [1002 D-F] 
Kylasa Sarabl1ala/J v. Co111n1issioncr of lncooie-tax, [1965] 2 
S.C.R. 
310, followed. 
OvlL APPELLATE JURISDICTION : Civil Appeal No. 1058 of 
1965. 
Appeal by special leave from the judgment and order dated 
March 14/15, 
1961 of the Bombay High Court in Income-tax 
Reference No. 56 of 1960. 
E 
F 
G 
Arvind P. Patwe, 0. C. Mathur, for the appellant. 
H 
S. T. Desai, A. N. Kirpa/ and R. N. Sachthey, for tht' res-
• 
pondent. 
• 
B 
• c 
D 
E 
F 
G 
H 
• 
WADILAL JIVANBHAI v. c.I.T. (Ramaswami, I.) 
999, 
The Judgment of the Court was delivered by 
Ramaswami, J. This appeal is brought, 
by special leave, 
on behalf of the assessee from the judgment of 
the Bombay 
High Court dated March 15, 1961 in Income-Tax Reference No. 
56of1960. 
The assessee is a partnership firm constituted under a Deed of 
Partnership dated March 19, 1950. The partners are three brothers-
Nandlal Bhimjibhai, 
Tarachand Bhimjibhai 
and Rajnikant 
Bhimjibhai, each one having an equal I/3rd share 
in the part-
nership 
firm. Prior to November, 1949, the three 
partners 
of the assessee-firm in partnership with eight 
others carried on 
business in Bombay and other places in the 
name and style of 
"Rajnikant Vitheldas & Co." In that larger firm, each one of 
the three brothers had an equal two annas share each, 
the other 
eight partners having the remaining ten anna share. The larger 
partnership of 'Rajnikant Vitheldas · & Co.' was dissolved 
on 
October 31, 1949 and on its dissolution the business of the two 
branches thereof at Nagpur was allotted to the three brothers, 
who thereupon as from November 1, 1949 constituted themselves 
into a new firm, viz., 
the assessee-firm under the deed of partner-
ship executed on March 19, 1950. This document recites 
that 
the tl1ree brothers have agreed to continue the business of the 
two branches at Nagpur in partnership on 
the tem1S mentioned 
in that document. 
For the purpose of this case, it is not neces-
sary to reproduce all the terms of the partnership deed. 
rt is 
sufficient to reproduce only four terms as follows : 
"3. The capital of the partnership 
shall be Rs. 
2,40,000.

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