http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH,HYDERABAD

       Vs.

RESPONDENT: JAYALAKSHMI RICE AND OIL MILLS CONTRACTOR CO.

DATE OF JUDGMENT15/01/1971

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. HEGDE, K.S.

CITATION:  1971 AIR 1015            1971 SCR  (3) 365  1971 SCC  (1) 280  CITATOR INFO :  E          1984 SC 684  (34)

ACT: Income-tax   Act,   1922,  s.   26A-Income-tax   Rules,   r. 2(b)--Indian Partnership Act, 1932, ss. 58, 59, 69-Rule 2(b) providing   that  in  respect  of  firms  registered   under Partnership Act the application for registration of firm u/s 26A  of the Income-tax Act shall be made before the  end  of the  previous year-Firm can be said to be  registered  under Partnership Act nor on date of receipt of application  under ss. 58 but when entry is made in register of firms under  s. 59-If  such  an entry is made after end of  ’previous  year’ firm  is not registered under the Partners-ship Act for  the purpose of r. 2(b).

HEADNOTE: The   assessee  firm  was  constituted  under  a   deed   of partnership  dated  October 6, 1955.  It was  to  come  into existence  with effect from November 5, 1954.  The  assessee filed   an  application  under  s.  26A  of  the   Act   for registration  of the firm for the assessment  year  1956-57. The  previous year of the firm was shown as the year  ending October  26,  1955.   The application was  received  by  the Income-tax Officer on October 14, 1955.  On October 20, 1955 the assessee filed before the Registrar of Firms a statement under  s.  58  of  the Indian  Partnership  Act,  1932.   On November 2, 1955 the Registrar of Firms filed the  statement of  the assessee and made entries in the register of  firms. On  March  23, 1961 the Income-tax Officer passed  an  order refusing to register the firm under s. 26-6A. inter-alia for the  reason that the application had not been made in  time. The  appeal  taken to the Appellate  Assistant  Commissioner failed.    The  Tribunal  also  upheld  the  order  of   the authorities below.  In reference the High Court answered the question  in  favour  of  the  assessee  holding  that   the partnership should be deemed to have been registered on  the date  when  the  application  was  presented  and  that  the requirement of r. 2(b) of the Rules would be satisfied if it became  registered under the Partnership Act even after  the ’application  under  s.  26A was filed.  in  appeal  by  the Revenue.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

HELD : (i) The view taken by the High Court was not correct. Under  the  Partnership  law it can be taken  to  have  been settled by decision,-, of High Courts, from a long time that the  registration  of firm takes place only  when  necessary entries are made in the register of firms under s. 59 of the Partnership Act by the Registrar.  Section 58 of the Act  no doubt  employs  language which, without  anything  more  may appear to lend support to the view that the registration  of a  firm  may be effected merely by  sending  an  application which would mean that as soon as an application is sent  and if entry is made under s. 59 pursuant to it the registration would  be effective from the date when the  application  was presented.  But s. 58(2) is not to be read in isolation  and has  to  be considered along with the scheme  of  the  other provisions  of  the  Act viz. ss. 59  and  69.   The  latter section  which  deals with the  effect  of  non-registration throws  light  on what was contemplated by  the  Legislature with  regard  to the point of time when the  firm  could  be regarded as registered. [368 C-G] Ram  Prasad  v. Kamta Prasad, A.I.R. 1935 All.  898,  Danmal Parshomadas v. Baburam Chhotelal, I.L.R. [1936] 58 All.  495 and Kerala Road Lines Corporation v. Commissioner of Income- tax, Kerala 51 I.T.R. 711, approved. 366 (ii) The views expressed by the Special Committee  appointed by the Government of India in respect of the Bill which came to  be passed by the Central Legislative as the  Partnership Act  were  irrelevant  for the  purpose  of  construing  the provisions of the Act. [1369B]

JUDGMENT: CIVIL  APPELLATE JURISDICTION :    Civil Appeal No.  545  of 1967. Appeal  from the judgment and order dated April 15, 1966  of the  Andhra  Pradesh High Court in Case Referred No.  40  of 1963. S.   C.  Manchanda,  B. D. Sharma and R.  N.  Sachthey,  for the .appellant. K. Rajendra Chaudhuri, for the respondent. The Judgment of the Court was delivered by Grover,  J. This is an appeal from a judgment of the  Andhra Pradesh High Court arising out of a reference made under  S. 66(1)  of the Income-tax Act, 1922, hereinafter  called  the ’Act’  of  the  question whether on the  facts  and  in  the circumstances  of the case the application under s.  26A  of the Act was filed out of time The facts are not in dispute.  The assessee firm was consti- tuted under a deed of partnership dated October 6, 1955.  It was  to  come into existence with effect  from  November  5, 1954.  The assessee filed an application under S. 26A of the Act  for  registration of the firm for the  assessment  year 1956-57.   The ’previous year’ of the firm was shown as  the year,  ending  October  26,  1955.   This  application   was received by the Income-tax Officer on October 14, 1955.  On October 20. 1955 the assessee filed before the Registrar  of Firms a statement under s. 58 of the Indian Partnership  Act 1932.  On November 2, 1955 the Registrar of Firms filed  the statement of the assessee and made entries in the  registrar of  firms.  On March 23, 1961 the Income-tax Officer  passed an  order refusing to register the firm under s.  26A  inter alia, for the reason that the application had not been  made in  time.   The  appeal taken  to  the  Appellate  Assistant Commissioner   by  the  assessee  failed.   The   Income-tax

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

Appellate  Tribunal also upheld the order of the  Income-tax Officer and the Appellate Assistant Commissioner.  On that a reference  was  sought  and  the  High  Court  answered  the question-referred  in favour of the asses,see on the  ground that the application had been filed in time. Section  26A of the Act provides that an application may  be made  to  the  Income-tax  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 the Act.  The application has to be made  by such  person or persons and at such time and has to  contain such particulars etc. as may be 367 prescribed.   Rules 2 to 6(b) of the Rules made under s.  59 of  the  Act  deal  with  registration  of  firms.   We  are concerned with the following material portion of Rule 2.               "Such  application shall........      be  ....               made ....               (a)   Where  the firm is not registered  under               the Indian Partnership Act, 1932 (IX of  1932)               or  or  where the deed of Partnership  is  not               registered under the Indian Registration  Act,               1908  (XVI of 1908), and the  application  for               registration is being made for the first  time               under the Act,               (i)   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,               (ii)  before  the end of the previous year  in               any other case;               (b)   Where  the firm is registered under  the               Indian Partnership Act, 1932 (IX of 1.932)  or               where  the need of partnership  is  registered               under  the  Indian Registration  Act  (XVI  of               1908) before, the end of the previous year  of               the firm........" Now   it   is  common  ground  that  the   application   for registration  was not made within the period  prescribed  by rule 2(a).  What has been urged throughout on behalf of  the assessee  is that the application to the Income-tax  Officer was governed by rule 2(b) and was in time as the firm should be  deemed to have been registered not on the date on  which it  was  actually registered by the Registrar of  Firms  but with  effect  from  the date on which  the  application  for registration was presented to the Registrar.  In other words the  firm  should be considered to have been  registered  on October 20, 1955 on which date the statement under s. 58  of the  Partnership  Act was filed by the assessee  before  the Registrar of Firms. The real question which has to be determined is whether  the registration of a firm under the Partnership Act takes place with  effect  from  the date on which  the  application  for registration is made in accordance with s. 5 8 of that  Act. Section  5 8 ( 1 ) provides that the registration of a  firm may be effected at any time by sending by post or delivering to the Registrar of the area in which any place of  business of  the  firm  is  situated or proposed  to  be  situated  a statement in the prescribed form and accom- 368 panied  by  the prescribed fee stating........ Under  S.  59 when the Registrar is satisfied that the provisions of S. 58 have been duly complied with he shall record an entry of the statement in a registrar called the "register of firms’  and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

shall file the statement.  In Ram Prasad v. Kamta  Prasad(1) it  was laid down that the registration of a firm under  the Pertnership Act takes place only when the necessary entry is made  in  the  register of firms, Even under s.  69  of  the Partnership  Act  which  deals  with  the  effect  of   non- registration   it  has  been  consistently  held  that   the registration of a firm subsequent to the filing of the  suit did not cure the defect; See Danmal Parshotamdas v.  Baburam Chhotelal(2).   Thus  under the Partnership law  it  can  be taken to have been settled by decisions of High Courts  from a long time that the registration of a firm takes place only when  the necessary entry is made in the register  of  firms under s. 59 of the Partnership Act by the Registrar.  It  is true  that sub-section (1) of s. 58 employs  language  which without anything more may land support to the view that  the registration of a firm may be effected merely by sending  an application which would mean that as soon as an  application is sent and if entry is made under s. 59 pursuant to it  the registration  would  be  effective from the  date  when  the application  was presented.  But s. 58(1) is not to be  read in isolation and has to be considered along with the  scheme of the other provisions of the Act, namely, s. 59 and s. 69. The  latter  section may not have a direct  bearing  on  the point  under our consideration but it throws light  on  what was contemplated by the legislature with regard to the point of time when the firm could be regarded as registered.   The Kerala  High Court has in Kerala Road Lines  Corporation  v. Commissioner of Income-tax, Kerala(1), clearly expressed the view  that reading ss. 58 and 59 of the  Indian  Partnership Act together a firm cannot be said to be registered when the statement prescribed by s. 58 and the required fee are  sent to  the Registrar and that the registration of the  firm  is effected  only when the ’entry of the statement is  recorded in the registrar of firms and the statement is field by  the Registrar  as  provided  in s. 59.  In  that  case  also  an identically   similar   question   arose   in   respect   of registration of a firm under s. 26A of the Income-tax Act. The High Court in the judgment under appeal referred to  the statement extracted from the report of the Special Committee which  had  been  appointed by the Government  of  India  to examine  the  provisions of the Bill before it  came  to  be passed by the Central Legislature as the Partnership Act and reference  was made in particular to the statement  relating to clause 58 corresponding (1) AIR[1935]Al1.898.    (2) I.L.R.[1936] 58ALL.495. (3)  51 I.T.R. 71 1. 369 to  S.  59  of the Partnership Act to the  effect  that  the Registrar  was a mere recording officer and that he  had  no discretion  but  to  record the entry in  the  registrar  of firms.   We  are unable to see how that  statement,  can  be taken into consideration for the purpose of interpreting the relevant provisions of the Partnership Act.. We Also  cannot concur with the other reasoning of the High Court for coming to  the conclusion that the partnership should be deemed  to have  been registered on the date when the application  was, presented  and  that the requirement of rule 2(b)  would  be satisfied if it became registered under the Partnership  Act even after the: application was filed. For  the reasons given above the appeal is allowed  and  the judgment of the High Court is set aside.  The answer to  the question  referred  must  be given in  the  affirmative  and against  the, assessee.  The appellant shall be entitled  to costs in this Court. G.C.                                                  Appeal

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

allowed’. 10-L807Sup.  CI/71 370