07 April 1970
Supreme Court


Bench: HEGDE,K.S.
Case number: Appeal (civil) 2200 of 1968






DATE OF JUDGMENT: 07/04/1970


CITATION:  1970 AIR 1343            1971 SCR  (1) 237  1970 SCC  (2)  48  CITATOR INFO :  RF         1972 SC  61  (14)

ACT: Income-tax Act, 1922, s. 26A-Whether I.T.O. should  register if  section and the rules are complied  with-Whether  I.T.O. can  go behind partnership deed-Section  2(9)-Definition  of ’person’  including  Hindu  Undivided  Family-If  could   be imported into Partnership Act, 1932. Partnership Act, 1932, s. 4-Partners, who can be-Association of Persons if ’person’ within meaning of section. Hindu  undivided family-If can enter into  partnership  with others.

HEADNOTE: A  firm consisted of 18 partners.  The partnership deed  did not  show  that  any of the partners  joined the  deed  as representatives of their Hindu Undivided Families.  The firm applied for registration under s. 26A of the Income-Tax Act, 1922.   The  income-tax  Officer,  the  Appellate  Assistant Commissioner and the Tribunal were of the opinion that  some partners of the firm having entered into the partnership  as representatives   of   their  respective   Hindu   undivided families,  in  view of section 4(3) of  the  Companies  Act, 1913,  the adult members of these families should  be  taken into consideration for determining whether or not the  total number  of  partners exceeded twenty.  On  that  basis  they arrived  at  the conclusion that the firm had more  than  20 partners  and  the  same having not  been  registered  as  a company  under  the Companies Act, the partnership  was  un- lawful.   The High Court answered a reference made to it  in favour  of the revenue.  In the appeal to this Court it  was contended;  (i)  Section  4(3) of the  Companies  Act,  1913 proceeded  on  the erroneous impression that a  joint  Hindu Family  can enter into a partnership which in law it  cannot as it has no legal personality; (ii) it was not open to  the Income Tax Officer to go behind the deed for the purpose  of registration under s. 26A and (iii) if the application,  for registration complied with the requirements of that  section and the rules made thereunder, it was not open to the Income Tax Officer to refuse to register.  Allowing the appeal,



HELD  : (i) It is only partnership constituted according  to the provisions of the partnership Act that can be considered as  partnership  under the Act.  Under the  Partnership  Act only  "persons"  can join as partners.   An  association  of persons  is  not  a  person  within  the  meaning  of   that expression  in  the  Partnership  Act.   The  definition  of "Person"  in  the  Income  Tax  Act  including  within   the definition  Hindu Undivided Family is intended  for  levying income-tax and other cognate matters and cannot be  imported into the Partnership Act, the provisions of which alone  are relevant  for finding as to who could join as  partners.   A Hindu  undivided family cannot as such enter into a  contact of Partnership with another person or persons.  The  concept of  a Hindu undivided family joining a partnership  presents considerable  difficulty.  It is a fleeting body and such  a partnership  is  likely  to have  a  precarious.  existence. Therefore,  the assumption in s. 4(3) of the Companies  Act, 1913,  that  a  Hindu Joint Family can be  a  partner  in  a partnership appear& to be based on an erroneous view of the law. [241 H 242 G-H] 238 Senaji  Kapurchand  V. Pannaji Devichand, A I.R.  1930  P.C. 300,  Dulichand Laxminarayana v. Commissioner of  income-tax Nagpur,  29 I.T.R. 535 and Commissioner of  Income-tax  West Bengal v. Kalu Babu Lal Chand, (1959) 37 I.T.R. 23, referred to. Lala Lachman Das v. Commissioner of Income Tax, 74 I.A. 277, distinguished’. (ii) For  the  purpose  of finding out as  to  who  are  all partners of a firm, one has only to look to, the partnership deed and not to go behind it. It is well settled that when a co-parcener,  even  when  he  is  the  Karta,  enters   into partnership with others the partnership that is created is a contractual partnership; that partnership is not between the family and the other partners,- it is a partnership  between the coparcener individually and his other partners. [244  B- C] P.   K.  P.  S.  Pichappa Chettiar  v.  Chokalingam  Pillai. A.I.R.   1934  P.C.  192,  Kshetra   Mohan-Sannyasi   Charan Sadhukhan  v.  Commr. of Excess Profits  Tax,  West  Bengal, (1953)  24  I.T.R.  488,  Firm  Bhagat  Ram  Mohan  Lal   v. Commissioner  of Excess Profits Tax, Nagpur and And.  (1956) 29 I.T.R. 521 and Commissioner of Income-tax, Bombay City v. Nandlal Gandalal, (1960) 40 I.T.R. 1, referred to. (iii)     The Income-tax Officer has no, power to reject  an application for registration under s. 26.A if the provisions of the section and the rules framed thereunder are  complied with.   The  jurisdiction  of  the  Income-tax  Officer   is confined to ascertaining two facts, namely, (1) whether  the application for registration is in conformity with the rules framed  under the Act and (2) whether the firm shown in  the document %,as a bogus one or had no legal existence.  It  is not open to the Income-tax Officer to go behind the deed and find  out  for  the purpose  of  registration  whether  the, partners  mentioned in the deed have joined the  partnership in  their  own  right or as  representing  others.   In  the present cast the application made for registration  complies with  the requirements of the section and the  rules  framed thereunder.  Hence the partnership must be held to have been validly formed as law did not at the relevant time  prohibit anyone, otherwise competent to contract from entering into a contract of partnership even though the beneficial  interest in his share may vest in others. [246 A-B, 247 E-F] Commissioner  of  Income-tax,  Madras  v.  Sivakashi   Match Exporting  Co.  (1954)  53 I.T.R. 204  and  Commissioner  of



Income-Tax  Gujarat v. ,I. Abdul Rahim and  Co.,  (1965)  55 I.T.R. 651, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2200, 2200A and 2200B of 1968. Appeals from the judgment and order dated November 30,  1967 of, the Allahabad High Court in Income-tax Reference No. 366 of 1963. M.   C.  Chagla and P. N. Tiwari, for the appellant (in  all the appeals). B.   Sen,  G.  L.  Sharnia  and  R.  N.  Sachthey,  for  the respondent (in all the appeals). 239 The, judgment of the Court was delivered by Hegde  J.-In these appeals by certificate the question  that falls  for  decision  is whether oil the facts  and  in  the circumstances of the case registration under s. 26(A) of the Indian  Income Tax Act, 1922 (to be hereinafter referred  to as the act) was rightly refused to the appellant firm on the ground  that  the  partnership  in  question  violated   the provisions of s. 4 of the Indian Companies Act, 1913. The  authorities under the Act as well as the High Court  of Allahabad  have answered that question in  the  affirmative. The assessee challenges that conclusion. The  above appeals relate to different assessment  years  of the same assessee, the relevant assessment years being 1952- 53, 1953-54 and 1954-55.  In all these years the Income  Tax Officer had refused to register the appellant firm under  s. 26A. All  the  partnership  deeds are, we are  told,  similar  in terms.  We have before us the deed executed on July 7, 1950. It  shows that the firm consists of 18 partners.   Ex  facie that deed does not show that any of the partners had  joined the  deed  as  representatives  of  their  Hindu   Undivided Families.  From the tenor of the document, they appear to be partners  in their own right.  The Income Tax  Officer,  the Appellate Assistant Commissioner and the Tribunal have  come to  the  conclusion  that  some  of  them  had  joined   the partnership  as Kartas of their respective  Hindu  Undivided Families.  All the authorities under the Act as well as  the High  Court have opined that the partnership in question  is not  lawful in view of s. 4(3) of the Indian Companies  Act, 1913.  The material portion of that provision reads (4). (1)....               (2)   No  company, association or  partnership               consisting  of more than twenty persons  shall               be  formed for the purpose of carrying on  any               other  business  that has for its  object  the               acquisition   of   gain   by   the    company,               association   or   partnership   or   by   the               individual  members  thereof,  unless  it   is               registered as a company under this Act, or  is               formed in pursuance of an Act of Parliament of               the United Kingdom or some other Indian law or               Royal Charter or Letters Patent.               (3)   This section shall not apply to a  joint               family carrying  on joint  family  trade  or               business  and  where two or  more  such  joint               families form a partnership, in computing the               number  of  persons for the  purpose  of  this               section, minor members of such families  shall               be excluded.



             240               (4)   Every  member of a company,  association               or   partnership  carrying  on   business   in               contravention   of  this  section   shall   be               personally liable for all liabilities incurred               in such business.               (5)...................... The Income Tax Officer, the Appellate Assistant Commissioner as  well  as  the Tribunal were of  the  opinion  that  some partners  of  the  assessee firm  having  entered  into  the partnership  as  representatives of their  respective  Hindu Undivided  Families,  the adult members  of  those  families should  be taken into consideration for determining  whether or  not  the total number of partners exceeded  twenty.   On that basis they have arrived at the conclusion that the firm has  more than twenty partners and the same having not  been registered as a company under the Companies Act, nor  having formed  ’in pursuance of an Act of Parliament of the  United Kingdom or some other Indian law or Royal Charter or Letters Patent, it must be held to be an unlawful partnership.  When the  question  formulated earlier was referred to  the  High Court  under  s. 66(1) of the Act, it was heard  by  Jagdish Sahai and Beg, JJ.  Jagdish Sahai J. was of the opinion that the partnership in question was not lawful.  Beg J. differed from  him  and  answered  the  question  in  favour  of  the assessee.  In view of this difference of opinion, the matter was referred to Takru J. He agreed with Jagdish Sahai J.  By a  majority  the  question referred to the  High  Court  was answered in favour of the revenue.  Hence these appeals. Mr. Chagla appearing on behalf of the assessee urged that no Hindu joint family as such can Join a partnership and it is now well settled that when a karta of Hindu Undivided Family joins  a firm as a partner even if he contributes his  share from  out  of  the family funds, the other  members  of  his family do not ipso facto ’become partners of that firm.   So far as the partnership is concerned, he is the only  partner though he may be accountable to the members of his family as regards  the  profits  earned.   According  to  the  learned counsel,  for  the  purpose of working out  the  rights  and liabilities  of the partners inter se one cannot  go  behind the  partnership deed.  Proceeding further he urged that  in considering whether a partnership should be registered under s.  26A  or not, the Income-tax Officer has merely  to  see, whether  the  requirements  of s. 26A of  the  Act  and  the relevant rules are complied with or not.  He is not entitled to investigate into the question as to who are  beneficially interested  in  the partnership.  According to  him  if  the requirements  of s. 26A and the relevant rules are  complied with,  the  Income-tax  Officer is  bound  to  register  the partnership.   The counsel urged that the second limb of  s. 4(3)  of  the Indian Companies Act, 1913,  proceeds  on  the erroneous impression that 241 a joint Hindu family can enter into a partnership, which  in law it cannot as it has no legal personality. Mr.  B.  Sen,  learned counsel for the  department  did  not contest  the  position that when a karta or a  member  of  a Hindu Joint family joins a partnership the other members  of his family do not become partners ipso facto.  But according to  him  it  is  open to the department  to  go  behind  the partnership deed and find out whether the individual who has joined  as  a partner has joined in his own right  or  as  a representative  of any other body.  His contention was  that in  view of s. 4(3) of the Indian Companies Act, 1913,  once the  Income-tax Officer comes to the conclusion that one  of



the  partners  of  a firm is a  representative  of  a  joint family,  he must deem that the adult members of that  family are  also partners of that firm and on that ’basis find  out whether the total number of partners exceed twenty.  If they exceed twenty he cannot register the partnership, as such  a partnership  contravenes  s. 4 (2) of the  Indian  Companies Act, 1913, Section  2  (6B)  of the Act provides  that  the  expression ’firm’, partner’ and ’partnership’ in the Act have the  same meaning respectively as in the Indian Partnership Act, 1932.               Section   4  of  the  Partnership  Act,   1932               prescribes               "Partnership" is the relation between  persons               who  have  agreed to share the  profits  of  a               business  carried  on by all or  any  of  them               acting for all.               Persons who have entered into partnership with               one another are called individually ’partners"               and  collectively "a firm" and the name  under               which  their business is carried on is  called               the ’firm name’. In  view of the aforementioned provision only "persons"  can join as partners.  Section 2(42) of the General Clauses  Act says a "Person" shall include any company or association  or body of individuals whether incorporation or not.  But  this definition  applies when there is nothing repugnant  in  the subject  or context.  After examining the provisions of  the Partnership  Act, the Privy Council in SenaJi Kapurchand  v. Pannaji   Devichand(1)-   and  this   Court   in   Dulichand Laxminarayana  v.  Commissioner of Income Tax,  Nagpur(2)  , have  held  that an association of persons is not  a  person within  the  meaning of that expression in  the  Partnership Act, It is true that s. 2(9) of the Act says that unless the context otherwise requires "person" includes Hindu Undivided Family,   This  definition  cannot  be  imported  into   the Partnership Act, the provisions of which alone are  relevant for finding as to who could join as partners.  It  is  only partnership constituted according to (1) A.I.R. 1930 P.C. 300. (2) 29, I.T.R. 535. 242 the provisions of the Partnership Act that can be considered as  partnerships under the Act.  The definition of  ’person’ in the Act is intended for the purpose of levying income-tax and for other cognate matters. On  the  basis  of  certain  observations  of  the  Judicial Committee  in  Lala Lachman Das v.  Commissioner  of  Income Tax(1), it Was contended on behalf of the department that a joint  Hindu  family can enter into  a  partnership.   Those observations  have to be read in the context in  which  they were  made.  The department in that case had  requested  the tribunal to refer the question "can there ’be a  partnership within the meaning of s. 2 sub-s. 6(B) of the Indian Income- tax  Act, 1922 between a Hindu Undivided Family as  such  on the  one part and one of its undivided members in his  indi- vidual  capacity on the other part." But that  question  was ultimately not referred as being unnecessary on the facts of the  case.  But the following observations of  the  Judicial Committee in its judgment are relevant :               "It  is unnecessary to consider in  this  case               the  question  relating to the validity  of  a               partnership  between a Hindu Undivided  family               as  such  of  the  one part  and  one  of  its               undivided  members in his individual  capacity               of  the other.  With reference to  the  latter



             kind  of  partnership there seems to  be  some               authority  favouring  the  view  that  such  a               partnership  cannot exist under the rules.  of               Hindu  law but their Lordships do not  propose               to deal with that question in this case." In  that  case the partnership was between the  karta  of  a joint  Hindu family and an undivided member of that  family. Hence  the  observations  in the  judgment  that  the  Hindu Undivided  family was a partner has really reference to  the karta  who  was a partner as representing  the  family.   In Commissioner  of Income-tax,, West Bengal v. Kalu  Babu  Lal Chand(2),  this Court observed that it is now  well  settled that  Hindu  Undivided Family cannot as such  enter  into  a contract  of  partnership with another  person  or  persons. ,Several  other  decisions  have taken the  same  view.   No decision taking a contrary view was’ brought to our  notice. The   concept  of  a  Hindu  Undivided  Family   joining   a partnership  presents  considerable  difficulty.   A   Hindu Undivided  Family  is  a  fleeting  body.   Its  composition changes  by births, deaths, marriages and divorces.  Such  a partnership  is likely to have a precarious existence.   The assumption  in  S. 4(3) of the Companies’ Act, 1913  that  a Hindu Joint family can be a partner in a partnership appears to be based on an erroneous view of the law. (1) 74.  I.A. 277.           (2) (1959) 37, I.T.R. 23. 243 The next question is whether when a deed of partnership does not  on the face of it show that any Hindu Undivided  Family has  joined  the partnership, is it open to  the  Income-tax Officer  to behind the deed and find out for the purpose  of registration under s.    26A whether the ostensible  partner is the representative of someone   else. The Judicial Committee in P. K. P. S. Pichappa Chettiar and Ors.  v. Chokalingam Pillai and Ors. (1) ruled that where  a managing member of a joint family enters into a  partnership with a stranger, the other members of the family do not ipso facto  become partners in the business so as to clothe  them with all the rights and obligations of a partner as  defined by  Contract Act.  In such a case the family as a unit  does not  become a partner but daily such of its members-  as  in fact enter into contractual relationship with the stranger. In  Kshetra  Mohan-Sannyasi Charan Sadhukhan  v.  Commr.  of Excess  Profits  Tax, West Bengal,(1) this Court  laid  down that a Hindu Undivided Family is included in the  expression "person,  as defined in the Indian Income-tax Act but it  is not  a juristic person for all purposes; when two kartas  of Hindu   Undivided  Families.  enter  into   a   partnereship agreement,  the  partnership though popularly known  as  one between two Hindu Undivided Families in the eye of the  law, it  is  a partnership between the two kartas and  the  other members  of the families do not ipso facto become  partners; there is, however, nothing to prevent the individual members of   one  Hindu  Undivided  Family  from  entering  into   a partnership  with  the individual members of  another  Hindu Undivided  Family  and in such a case it: is  a  partnership between   the   individual   members  and   it   is   wholly inappropriate to describe such a partnership as one  between two Hindu Undivided Families. In  Firm  Bhagat  Ram Mohan Lal v.  Commissioner  of  Excess Profits- Tax, Nagpur and anr.(3), this Court ruled that when the karta of a joint family enters’ into a partnership with the  stranger, the members of the family do not  ipso  facto become partners in   that firm.  They have no right to  take part  in its management or to sue for its dissolution.   The creditors of the firm would no doubt be entitled to  proceed



against the joint family assets including the shares of  the non-Partner  co-parceners  for realisation of  their  debts. But that is because under the Hindu law, the karta has.  the right  when  properly carrying on business to pledge  the  H credit of the joint family to the extent of its assets,  and not  because  the  junior members  become  partners  in  the business.  The liability (1)  A.I.R. 1934, P.C. 192. (3)    (1956) 29, I.T.R. 521. (2)(1953) 24, I. T. R. 488. 244 of  the  latter  arises  by  reason’  of  their  status   as coparceners and not by reason of any contract of partnership by them. In  Commissioner  of  Income-tax,  Bombay  City  v.  Nandlal Gandalal(1), this Court again observed that the position  in Hindu law with ’regard to a coparcener, even when he is  the karta entering into partnership with others in carrying on a business  is well settled.  The partnership that is  created is  a  contractual  partnership  and  is  governed  by   the provisions  of  the  Indian  Partnership  Act,  1932.    The partnership  is  not  between  the  family  and  the   other partners;  it  is  a  partnership  between  the  _coparcener individually  and  his other partners.   The  coparcener  is undoubtedly  accountable  to  the  family  for  the   income received, but the partnership is exclusively one between the contracting members, including the individual coparcener and the  strangers.   On  the  death  of  the  coparcener,   the surviving members of the family cannot claim to continue  as partners with the others or institute a suit for dissolution of  partnership; nor can the stranger partners sue  them  as partners for the coparcener’s share of the loss.  Therefore, so  far as  the  partnership  is  concerned,  both   under partnership  law  and  under  Hindu  law,  the  control  and management is in the hands of the individual coparcener  who is the partner, and not in the family. In  Commissioner of Income-tax, Madras v.  Bagyalakshmi  and Co.   Udamalpet(2),  this Court observed  that  contract  of partnership  has  no  concern with  the  obligation  of  the partners  to others in respect of their shares of profit  in the   partnership.   it  only  regulates  the   rights   and liabilities of the partners.  A partner may be the karta  of a joint Hindu family, he may be a trustee, he may enter into sub-partnership  with  others,  he may  under  an  agreement express  or  implied, be the representative of  a  group  of persons;  he  may be a benamidar for another.  In  all  such cases  he occupies a dual position qua the  partnership,  he functions in his personal capacity; qua the third parties in his representative capacity; third parties, whom one of  the partner represents, cannot enforce their rights against  the other partners nor can the other partners do so against the said  third parties.  Their right is only to a share in  the profits  of their partner-representative in accordance  with law  or in accordance with the terms of the  agreement,  as the  case  may  be.  The law of partnership  and  Hindu  law function  in different fields.  A divided member or some  of the  divided  members  of the  erstwhile  joint  family  can certainly enter into a partnership, with third parties under some  arrangement among the members of the  divided  family. Their  shares in the partnership depend on the terms of  the partnership; the shares of the members of the divided (1) (1960) 40 I.T.R.1. (2) [1962] 2 S.C.R. 22. 245 family  in  the  interest of  their  representative  in  the partnership depend upon the terms of the partition deed.



From  these  decisions it follows that for  the  purpose  of finding, out as to who are all partners of. a firm, one  has only  to look to the partnership deed and not to  go  behind it. Another contention urged by Mr. Chagla was that the scope of the  enquiry  I  under  s. 26A is  a  limited  one;  if  the application   made  for  registration  complies   with   the requirements   of   that  section  and  the   rules   framed thereunder.,  then it is not open to the income-tax  Officer to refuse to register the firm.  Section 26A says :               (1)   Application   may   be   made   to   the               Income7tax  officer  on behalf  of  any  firm,               constituted under an instrument of partnership               specifying   the  individual  shares  of   the               partners,  for registration for the  purposes,               of  this Act and of any other  enactment  for               the  time  being  in  force  relating  to  the               Income-tax or super-tax.               (2)   The  application shall be made  by  such               person or persons, and at such times and shall               contain such particulars and shall be in  such               form,  and be verified in such manner, as  may               be  prescribed and it shall be dealt  with  by               the  Income-tax Officer in such manner as  may               be prescribed." The  conditions of registration prescribed in  this  section and  the relevant rules are : (1) on behalf of the firm,  an application  ,should  be made to the Income-tax  Officer  by such   person  and  at  such  times  and   containing   such particulars, being in such form and verified in such  manner as  are  prescribed by the rules;, (2) the  firm  should  be constituted  under  an instrument of  partnership;  (3)  the instrument  must specify the individual shares of the  part- ners  and (4) the partnership must be valid and genuine  and must   actually   exist-in  the  terms  specified   in   the instrument.  If all the above conditions are fulfilled,  the Income-tax Officer is bound to register the firm unless  the assessee has contravened s. 23(4) of the Act. In  Commissioner  of Income-Tax, Madras v.  Sivakashi  Match Exporting  Co. (1) this Court held that the combined  effect of s. 26A and the rules made thereunder was that the Income- tax  Officer could not reject an application made by a  firm if it gave the necessary particulars prescribed by the rules and  if  there  was  a firm in existence  as  shown  in  the instrument  of  partnership.  A firm is said to  be  not  in existence if it was a bogus and not a (1) [1954] 53 I.T.R. 204, Sup.  Cl/70-2 246 genuine one or if in law the constitution of the partnership was  void.  The jurisdiction if the Income-tax Officer  was, therefore,  confined  to ascertaining two facts  namely  (1) whether  the application for registration was in  conformity with the rules framed under the Act and (2) whether the firm shown in the document presented for registration was a bogus one  or  had  no legal existence.   Further  the  discretion conferred  on  the  Income-tax Officer under s.  26A  was  a judicial  one and he could not refuse to register a firm  on mere speculation.  He had to base his conclusion on relevant evidence.  Therein this Court further held that there was no prohibition  under the Partnership Act against a partner  or partners  of  other  firms combining  together  to  form a separate partnership to carry on a different business.   The fact  that such a partner entered into sub-partnership  with others  in  respect of his share did not  detract  from  the



validity of the partnership; nor was the manner in which  he dealt with his share of the profits of any relevance to  the question of the validity of the partnership. In Commissioner of Income-Tax Gujarat v. A. Abdul Rahim  and Co. (1), this Court ruled that registration of a partnership deed  under  s.26A of the Act could not ’be refused  on  the ground that one of the partners was a benamidar for  someone else.  Therein this Court observed that it is a settled  law that  if  a  partnership is a ’genuine and  valid  one,  the Income-tax  Officer has no power to reject its  registration if  the  other  provisions of s.26A  and  the  rules  framed thereunder  are  complied  with.   When  a  firm  makes   an application  under  s.26A for registration,  the  Income-tax Officer  can reject the same if he comes to  the  conclusion that  the  partnership is not genuine or the  instrument  of partnership does not specify correctly the individual  share of  the partners.  But once he comes to the conclusion  that the partnership is genuine and a valid 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 the  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  none  in  regard  to  the  question  of registration.   His  beami  character does  not  affect  the benaamidar’s  capacity as partner or his  relationship  with the other members of the partnership.  If a partner is  only a  benamidar  for,  another, it can only  mean  that  he  is accountable to the real owner for the profits earned by  him from and out of the partnership.  Therefore a benamidar is a mere  trustee  of the real owner and he  has  no  beneficial interest in the property or the business of the real  owner. But,  in law, just as in the case of a trustee, he can  also enter into a partnership with (1)  (1965) 55, I.T.R. 651. 247 others.  The benamidar of a partner, qua the other partners, has separate And real existence; he is governed by the terms of  the  partnership deed, his rights  and  liabilities  are governed by the terms of the contract and by the  provisions of  the partnership Act; his liability to third parties  for the  acts  of the partnership is coequal with  that  of  the other partners; the other partners have no concern with  the real  owner; they can only look to him for  enforcing  their rights   or   discharging  their   obligations   under   the partnership deed.  Any internal arrangement between him  and ,another  is not governed by the terms of  the  partnership; that  arrangement operates only on the profits  accruing  to the  benamidar; it is outside the  partnership  arrangement. If a benamidar possesses the legal character to enter into a partnership  with another, the fact that he  is  accountable for his profits to, and has the right to be indemnified  for his  losses by a third party or even by one of the  partners does not discharge him of the said character. As mentioned earlier, the persons who are shown in the part- nership deed with which we are concerned in these appeals as partners,  appeared  to  have  joined  the  same  in   their individual  capacity.  There is nothing in the partnership deed  to indicate that they have joined the  partnership  as kartas of their respective families.  It was not open to the Income-tax  Officer to go behind the deed and find out,  for the  purposes  of  registration under  s.  26A  whether  the partners  mentioned in the deed have joined the  partnership in  their  own right or as representing others.   Hence  the



partnership must be held to have been validly formed as  law did  not  at the relevant time prohibit any  one,  otherwise competent  to  contract  from entering into  a  contract  of partnership  even  though, the beneficial  interest  in  his share  may  vest  in  others.   The  application  made   for registration  complies with the requirements of s.  26A  and the  rules  framed  thereunder.   Therefore  the  Income-tax Officer was bound to register the partnership. For the reasons mentioned above, we allow these appeals, set aside  the  order  made by the High  Court  and  answer  the question  referred to the High Court in the negative and  in favour of the assessee.  The department shall pay the  costs of the assessee in this Court as well as in the High  Court. One hearing fee. R.K.P.S.              Appeals allowed. 248