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PETITIONER: SHERE PUNJAB SILK STORES, DELHI

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, DELHI

DATE OF JUDGMENT11/12/1972

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. REDDY, P. JAGANMOHAN

CITATION:  1973 AIR 2401            1973 SCR  (3)  76  1973 SCC  (4) 206

ACT: Income  Tax Act (11 of 1922) s. 26 A and Income  Tax  Rules, 1922 rr. 2, 3 and 6-Application for renewal of registration- Division  of  previous year’s  profits-If  incumbent  before application is made.

HEADNOTE: The  assessee firm applied for renewal of  its  registration under s.26A, Income Tax Act, 1922, in May 1958, stating that the  income of the previous year, which ended on  March  31, 1958,  had been divided among the partners.  The  Department Tribunal  and  the  High  Court did  not  believe  that  the previous  year’s  income had been divided and  rejected  the application. Dismissing the appeal to this Court, HELD : From a reading of the section and rules 2, 3 and 6 of the In,come tax Rules and the forms prescribed, it is  clear that  in  the  case of an application  for  renewal,  it  is incumbent  on the part of the assessee to have  divided  the previous  year’s profits before the application for  renewal is  made.   The  fact  that  the  interpretation  may  cause hardship to the assessee is irrelevant when the language  is plain. [81-G] Surajmal  v.  Commissioner of Income-tax, Madras, 43  I.T.R. 491  and Ganesh Lal Laxmi Narain v. Commissioner  of  Income Tax, U.P. 68 I.T.R., 696, approved. Khanjan  Lal Sewak Ram v. Commissioner of Income-tax,  U.P., 83 I.T.R. 175, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1690 of 1969. Appeal  by special leave from the judgment and  order  dated July  15,  1968  of the Delhi High Court  at  New  Delhi  in Incometax Reference No. 44 of 1964. G.C. Sharma, R. Chawla, S. R. Gupta, R. P. Soni and K. B. Rohtagi for the appellant. F.   S.  Nariman, Addl.  Solicitor-General of India,  A.  N. Kirpal, S.   P. Nayar and R.N. Sachthey for the respondent. The Judgment of the Court was delivered by

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HEGDE, J. This is an appeal by special leave.  The appellant is  the assesssee.  In this case we are concerned  with  his assessment  for the assessment year 1958-59.   The  relevant previous  year ended on March 31, 1958.  The  assesses  firm applied for renewal of its registration under section  26(A) of  the  Indian  Income Tax Act 1922 (in  short  ’the  Act’) before  the  Income-Tax Officer on May 26,  1958.   In  that application he mentioned that the previous years’ income had been  divided  among the partners.  The  Income-Tax  Officer rejected  that application.  He did not believe the  version of the assessee that the previous years’ income 77 had  been  divided.   In  appeal,  the  Appellate  Assistant Commissioner  agreed  with  the conclusion  reached  by  the Income-tax Officer.  On a further appeal being taken to  the Income-tax  Appellate Tribunal the Tribunal agreed with  the conclusions  reached by the lower authorities.   Before  the Tribunal yet another contention appears to have been  taken. That  contention  was that at any rate the  partners  having divided the income of the previous year as evidenced by  the balance  sheet before the assessment Was made, the  assessee firm was entitled for its registration under section  26(A). The Tribunal did not go into that question.  The High  Court agreed with the view taken by the Tribunal. The  only question that arises for decision in this case  is whether it was incumbent on the part of the assessee to have divided the profits of the previous year before it made  its application  for  renewal of the  registration  certificate. For  deciding this question it is necessary to refer to  the relevant  provisions  of  the  Act as  well  as  the  Rules. Section 26 (A) of the Act reads. thus.- "26A.  Procedure in registration of firms (1)  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 this Act  and of any other enactment for the time being in force  relating to income-tax or super tax. (2)  The  application  shall  be  made  by  such  person  or persons,   and  at  such  times  and  small   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." Turning to the relevant Rules, they are found in Rules 2,  3 and 6. These Rules read thus:-- "Rule   2-Any  firm  constituted  under  an  Instrument   of Partnership specifying the individual shares of the partners may,  under  the  provisions of section 26A  of  the  Indian Income-tax Act, 1922 (hereinafter in these rules referred to as  the  Act),  register with  the  Incometax  Officer,  the particulars contained in the said Instrument on  application made in this behalf. Such  application shall be signed by all the  partners  (not being minors) personally, or in the case of a dis- 78 solved  firm  by  all persons (not being  minors)  who  were partners  in the firm immediately before dissolution and  by the legal representative of any such partner who is deceased and  shall, for any year of assessment UP to  and  including the,  assessment  for  the year ending on the  31st  day  of March, 1953, be made before the 28th February, 1953, and for any year of assessment subsequent thereto, be made. (a)Where the  firm  is not  registered  under  the  Indian Partnership  Act  1932 (TX of 1932), or where  the  deed  of

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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 (TX of 1932), or where the  deed  of partnership is registered under the Indian Registration Act, 1908 (XVI of 1908), before the end of the previous year  of the firm, and (c)where  the application is for renewal  of  registration under  Rule 6 for any year, before the 30th day of  June  of that year : Provided  that  the,  Income-tax Officer  may  entertain  an application   made  after  the  expiry  of  the   time-limit specified in this rule, if he is satisfied that the firm was prevented  by sufficient cause from making  the  application within the specified time . Rule  3-The application referred to in Rule 2 shall be  made in the form annexed to this rule and shall be accompanied by the original Instrument of Partnership under which the  firm is constituted, together with a copy thereof : provided that if  the  Income-tax  Officer  is  satisfied  that  for  some sufficient    reason   the   original   Instrument    cannot conveniently  be  produced,  be  may accept  a  copy  of  it certified in writing by all the partners (not being  minors) or,  where the application is made after dissolution of  the firm, by all the persons 79 referred  to  in the said Rule, to be correct copy,  and  in such  a  case  the application shall  be  accompanied  by  a duplicate copy.                            FORM I FORM OF APPLICATION FOR REGISTRATION OF A FIRM UNDER SECTION 26A OF THE INDIAN INCOME-TAX ACT, 1922. TO The Income-tax Officer,                                    Dated 19 Income-tax year 19                  19 1. ................ 2............... 3.We do hereby certify that the profits (or loss if any-) of  the previous year were/will be (period upto the date  of dissolution  were/will be) divided or credited as  shown  in section  B  of the Schedule and that the  information  given above and in the attached Schedule is correct.                                    (Signatures)                                    (Address) Note :-This application must be signed..............           SCHEDULE Name of      Address Date of  (1)       (1)   (2) partner               admitt-Interest  Salaryor  Share   in REMARKS                     ance to on capital commis- the bal                     partner or loans sion from ance of                     ship.   (if any)   firm   profits                                              (or loss)                                                   etc. ----------------------------------------------------- 1     2          3        4         5       6       7 ------------------------------------------------------ ------------------------------------------------------

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(A)Particulars  of the firm as constituted at the date  of this application. ------------------------------------------------------------- ------------------------------------------------------------- 80 (B)  Particulars of the apportionment of the income, profits or  gains (or loss) of the business, profession or  vocation in  the  previous  year between the  partners  who  in  that previous  year  were,  entitled to  share  in  such  income, profits   or   gains  (or  loss).   Applicable   where   the application  is made after the end of the relevant  previous year). ------------------------------------------------------ ------------------------------------------------------------ Note:-(I)     If     the     interest,     salary     and/or commission      ............................................ column with the letter   "R".   (In  other   cases   the interest, salary and/or commissionmay   exceed  the   total profits  so as to leave a balance of net loss  divisible  in column 6). ---------------------------------------------------- (2)If  any partner is entitled to share in profits but  is not  liable to bear a similar proportion of any losses  this fact  should  be indicated by putting against his  share  in column 6 the letter "P". Rule  6 Any firm to whom a certificate of  registration  has been  granted  under  Rule 4 may  apply  to  the  Income-tax Officer to have the certificate of registration renewed  for a  subsequent  year.   Such  application  shall  be   signed personally  by  all the partners (not being minors)  of  the firm or, where the application is made after dissolution  of the  firm,  by  all  persons (not  being  minors)  who  were partners  in the firm immediately before dissolution and  by the legal representative of any such person who is deceased, and accompanied by a certificate in the form set out  below. The application shall be made before the 30th day of June of the  year for which assessment is to be made  provided  that the  Income-tax  Officer may entertain an  application  made after  the expiry of the said date, if he is satisfied  that the  firm was prevented by sufficient cause from making  the application before that date. FORM  OF  APPLICATION FOR THE RENEWAL OF REGISTRATION  OF  A FIRM LTNDER SECTION 26A OF THE INDIAN INCOME-TAX ACT, 1922 TO The Income-tax Officer                               Dated              19 Assessment for the Income-tax Year 19 /19 1.................. 2................. 81 3.We do hereby further certify that the profits (or  loss if  any) of the previous year were/period up to the date  of dissolution  were/will  be  divided  or  credited  as  shown below:- Particulars  of the apportionment of the income, profits  or gains  (or loss) of the business, profession or vocation  in the previous year or the period upto the date of dissolution between  the  partners who were entitled to  share  in  such income, profits or gains (or. loss). Name of  Address     Date of  (1)   (1)           (2) Partner             admitt-   Interest  Salary   Share                    ance of   on capital or comm- in the REMARKS                    partner- or loans    ission   balance                     ship    (if any)    from    of profits                                         firm.   (or loss)

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                                                 etc. etc. ------------------------------------------------------------- 1     2           3        4     5         6          7 ---------------------------------------------------------------- Note  :-(1)  If  the  interest,  salary   and/or............ loss divisible in column 6. (2)  If any partner is entitled ........ his share in column 6 the letter "P".                                         (Signatures)                                              (Address) Note :-This application must be signed  personally ...... of any such person who is deceased". From  a reading of these provisions it is clear that in  the case  of an application for renewal it is incumbent  on  the part  of  the assessee to have divided the  previous  year’s profits.  This conclusion appears to be obvious from Section 26(A) read with Rules 2, 3, 6 and the forms set out earlier. The  contention’ of Mr. Sharma, the learned counsel for  the assessee, that if the relevant provisions are interpreted in the  manner  that we have done it leads to hardship  to  the assessee,  is not relevant in view of the plain language  of the provisions. Our  conclusion  in this regard receives  support  from  the decision  of Madras High Court in Surajmall v.  Commissioner of, L63lSuP Cl/73 82 Income-tax, Madras(1), and that of the Allahabad High  Court in  Ganesh Lal Laxmi Narain v. Commissioner  of  Income-tax, U.P.(2). In Khanjan Lal Sewak Ram v. Commissioner of Income- tax,  U.P.(3)  this Court had ruled that para 3  of  Rule  6 (supra)  is mandatory.  We see no merit in this appeal.   It is dismissed with costs. V.P.S.                               Appeal dismissed. (1)  43 I.T.R. 491. (2)  68 I.T.R. 696. (3)  83 I.T.R. 175. 83