# MESSRS PRATAP~AL LUXMICHAND v. COMMISSIONER OF INCOME-TAX, MADHYA

- **Citation:** [1956] 1 S.C.R. 91
- **Court:** Supreme Court of India
- **Decided:** 1956
- **Case number:** Civil Case No. 53 of 1950
- **Bench:** S. R. DAs, Bhagwati, Venkatarama Ayyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/messrs-pratap-al-luxmichand-v-commissioner-of-income-tax-madhya-1283
- **Pages:** 9

## Headnote

Registration of firm-Deed of partnership and application for
registration not signed bu all partners-Refusal to register by the In·
come-tax Officer-Powers of the Appellate Assistant Oommissione1·-
I ndian Income-tax Act (XI of 1922), 1. 26-A-Indian Income-tax
Rules, 1922, rule 2.
The appellant (a firm) consisted of seven partners and a deed
of partnership was executed by all the partners except one who
happened to be in Jail being a security prisoner under the Defence
of India Rules.
An application for registration of the firm under
s. 26-A of the India.n Income-tax Act was made before the Incometa.x Officer, who, however, rejected it on the ground that the deed of
partnership and the application for registration were not signed by
all the partners. On appeal, the Appellate Assistant Commissioner
cancelled the order of the Income-tax Officer and directed him to register the firm after obtaining the signature of the partner who had
not signed before, both on the application for registration and the
deed of partnership.
Held, that under Rule 2(c) of the Indian Income-tax Rules,
1922, £re.med under s. 26· A(2) of the Indian Income·tax Act, the
Appellate Assistant Commissioner had only the power to direct
registration of the firm if an application duly signed by all the
partners had been presented to him before the assessment was confirmed, reduced, enhanced or a.nnulled and tha.t he wa.s not legally
1956
February 8
92
·SUPREME COURT REPORTS
[1956]
1956
competent to direct the Income·tax Officer to register the firm after
.
obtaining the signature of the partner who had not signed before.
Messrs Pratapmal
Luxmicliand
v.
Commissioner of
Income-tax,
Madhya Pradesh

## Text

-
S.C.R.
SUPREME COURT REPORTS
91
admissible for the purpose.
In our judgment, the
1956
finding of the High Court on this issue was clearly Rafa Sri S~ilendra
erroneous.
Narayan Bhanja
Each of the conclusions we have arrived at on the
D•o
first two points is quite sufficient, by itself, to enable
v.
.
us to dispose of this appeal and it is not necessary for Th• Slate 01 Oms"
us to deal with or express any opinion on the other
-
Th
1
h
Das C.J.
three points canvassed before us.
e resu t, t erefore, is that this appeal should be dismissed with costs
and we order accordingly.
MESSRS PRATAP~AL LUXMICHAND
v.
COMMISSIONER OF INCOME-TAX, MADHYA
PRADESH.
[S. R. DAs, C. J., BHAGWATI and VENKATARAMA
AYYAR JJ.]
Registration of firm-Deed of partnership and application for
registration not signed bu all partners-Refusal to register by the In·
come-tax Officer-Powers of the Appellate Assistant Oommissione1·-
I ndian Income-tax Act (XI of 1922), 1. 26-A-Indian Income-tax
Rules, 1922, rule 2.
The appellant (a firm) consisted of seven partners and a deed
of partnership was executed by all the partners except one who
happened to be in Jail being a security prisoner under the Defence
of India Rules.
An application for registration of the firm under
s. 26-A of the India.n Income-tax Act was made before the Incometa.x Officer, who, however, rejected it on the ground that the deed of
partnership and the application for registration were not signed by
all the partners. On appeal, the Appellate Assistant Commissioner
cancelled the order of the Income-tax Officer and directed him to register the firm after obtaining the signature of the partner who had
not signed before, both on the application for registration and the
deed of partnership.
Held, that under Rule 2(c) of the Indian Income-tax Rules,
1922, £re.med under s. 26· A(2) of the Indian Income·tax Act, the
Appellate Assistant Commissioner had only the power to direct
registration of the firm if an application duly signed by all the
partners had been presented to him before the assessment was confirmed, reduced, enhanced or a.nnulled and tha.t he wa.s not legally
1956
February 8
92
·SUPREME COURT REPORTS
[1956]
1956
competent to direct the Income·tax Officer to register the firm after
.
obtaining the signature of the partner who had not signed before.
Messrs Pratapmal
Luxmicliand
v.
Commissioner of
Income-tax,
Madhya Pradesh
CIVIL APPELLATE JURISDICTION:
No. 199 ofl955.
Civil Appeal
Appeal by special leave from the judgment and
order dated the 17th day of April 1953 of the Nagpur
High Court in Miscellaneous Civil Case No. 53 of
1950.
Nur-ud-din Ahmad and Naunit Lal, for the appellant.
0. K. Daphtary, Solicitoi·-General of India, G. N.
Joshi and R.H. Dhebar, for the respondent.
1956. February 8.
The Judgment of the Court
was delivered by
BHAGWATI J.-This is an appeal with special
leave from the Judgment and Order of the High Court
of Judicature at Nagpur on a reference made by the
Income-tax Appellate Tribunal, Bombay Branch 'A'
under section 66(1) of the Indian Income-tax Act XI
of 1922 whereby the High Court answered the referred question against the appellant .
. The appellant, a firm of Messrs Pratapmal Laxmichand of Betul consisted of 7 partners, viz., Misrilal
Goti, Meghraj Goti, Panraj Goti, Phulchand, Basanti"
bai, Ratanbai and Gokulchand Goti. A deed of
partnership was executed on the 12th February 1944
by all the partners except Gokulchand Goti who
happened to be in the Seoni Jail being a security
prisoner under the Defence of India Rules. He was
unable to sign the same in spite of all efforts to obtain his signature in prison. An application for
registration of the firm under section 26-A of the Act
for the assessment year 1943-44 was made on the 24th
March 1944 personally signed by the other 6 partners
of the firm and was accompanied by the deed of
partnership which also had been signed by those 6
partners. The Special Income-tax Officer, Nagpur,
rejected the application on the ground that the deed
itself was not valid inasmuch as it had not been signed
S.C.R.
SUPREME COURT REPORTS
93
by all the partners mentioned in the body and there
.195/i
was no signature of Gokulchand on the deed and the Messrs Pratajmlal
application. An appeal was taken to the Appellate
Lu.miichand
Assistant Commissioner against this decision of the
v.
Special Income-tax Officer on the 24th April 1944.
Commissionerof
Gokulchand appended his signature to the deed of
Income-tax,
partnership in Seoni Jail on the 9th January 1945. Madhya Pradesh
The appeal was heard before the Appellate Assistant
BhagwatiJ.
Commissioner on the 20th March 1947 and he passed
an order on the 17th February 1948 cancelling the
order of the Special Income-tax Officer and directing
him to register the firm after obtaining the signature
of Gokulchand both on the application for registration and the deed of partnership. At the instance
of the Commissioner of Income-tax, C. P. and Berar,
an appeal was filed against this order of the Appellate Assistant Commissioner by the Income-tax
Officer, Spl. I.T. cum E.P.T. Circle, Nagpur, before
the Income-tax Appellate Tribunal. The Tribunal
allowed the appeal by its order dated 11/16 October
1948 observing that the Special Income-tax Officer
was justified in refusing to register the firm as the
application for registration was not signed by Gokulchand, that Rule 2( c) of the Indian Income-tax Rules,
1922, on which the Appellate Assistant Commissioner
seems to have relied did not apply and the Appellate
Assistant Commissioner was not justified in directing
the Income-tax Officer "to, register the firm after
obtaining the signature of Seth Gokulchand both in
the application for registration and the deed of partnership". The appellant applied for a reference to
the High Court under section 66(1) of the Act and
the Tribunal referred the following question arising
out of its order for the opinion of the High Court:
"Whether on the facts and in the circumstances of
the case the Appellate Assistant Commissioner was
legally competent to direct the Income-tax Officer to
register the firm after obtaining the signature of Seth
Gokulchand both in the application for registration
and in the deed of partnership". When the statement
of the case was being drawn up by the Tribunal,
counsel for the appellant suggested that the words
1956
Meara Prata/lfnal
Llumlchrm4
v.
Commlaslonerof
lncottM-lax,
Madhya Pradesh
BhagwatiJ.
94
SUPREME COURT REPORTS
[1956)
appearing in para 6 of the statement, viz., "No application was submitted to the Appellate Assistant
Commissioner seeking his permission under Rule 2(c)
of the Indian Income-tax Rules" be deleted. He also
suggested that the concluding words in the question
referred to the High Court, viz., "after obtaining the
signature of Seth Gokulchand both in the application
for registration and in the deed of partnership" be
deleted. With regard to the latter suggestion the
Tribunal observed that they were unable to delete
the same inasmuch as the words sought to be deleted
were the concluding words appearing in the Appellate Assistant Commissioner's order dated the 17th
February, 1948 giving directions to the Income-tax
Officer and were words which were material to the
question before the High Court. With regard to the
first suggestion counsel for the appellant had stated
that the appellant had submitted three applications
to the Appellate Assistant Commissioner all dated
20th March, 1947 and that it would be wrong to state
that no application was submitted to the Appellate
Assistant Commissioner. The allegation made by the
appellant was properly investigated subsequently
and the Tribunal was satisfied that the ·appellant
did not appear to have put in the application dated
20th March, 1947 as alleged. This .being the position the Tribunal stated that no change in the
statement of case was called for as suggested by the
appellant.
It was on this statement of case by the Tribunal
that the referred question ca.me to be determined by
the High Court. Before the High Court the appellant
had applied on the 27th November, 1950 that the
three certified copies of the three applications dated
20th March, 1947 made by the appellant to the
Appellate Assistant Commissioner with their originals
should be sent for by the High Court from the Income-
. tax Tribunal and an order had been made accordingly.
The High Court was of the opinion that the Appellate Assistant Commissioner should have ordered
registration of the firm provided there was an application before him duly signed by all the partners. As,
I
S.C.R.
SUPREME COURT REPORTS
95
however, there was no such application, he could not
1956
have directed the Income-tax Officer to register the M
P
t ,_ ,
fi
f
b . .
h
.
f G k l h
d
essrs ra a,, ... a.
rm a ter o tammg t e signature o
o u c, an
on
IMxmichana
the application and also in the partnership deed. The
v.
High Court accordingly answered the referred quesCommiuioner of
tion in the negative.
Income-tax,
An application under section 66-A(2) of the Act for Madhya Pradesh
a certificate for leave to appeal to this Court against
BhagwatiJ.
that order was dismissed by the High Court but the
appellant obtained special leave to appeal against the
same from this Court on the 6th December, 1954.
The main question that arises for our determination in this appeal is:-What are the powers of
the Appellate Assistant Commissioner on the hearing of an appeal against the refusal by the Income-tax Officer to register a firm under section
26-A of the Act and Rule 2 of the, Indian Incometax Rules, 1922?
Section 26-A of the Act provides:-·
"(l) 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 supertax.
(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".
Rule 2 of the Indian Income-tax Rules, 1922, which
was in force at the relevant period, in so far as is
material for the purpose of this appeal, provided:-
" Any firm constituted under an Instrument of
. Partnership specifying the individual shares of the
partners may, under the provisions of section 26-A of
the Indian Income-tax Act,. 1922 register with the
Income-tax Officer the particulars contained in the
said Instrument on application made in this behalf.
Such a pp Ii cation shall be signed by all the partners
96
SUPREME COURT REPORTS
[1956]
1956
(not being minors) personally and shall be made-.
~r .. Sf's PrataPmal
(a) before the income of the firm is assessed for
Luxmichand
·any year under section 23 of the Act, or
v.
eo,nmlssloner of
Income-tax,
JJfadhya Pradesh
Bhagwatij.
(b) ........................ or
(c) with the permissii>n of the Appellate Assistant Commissioner hearing an appeal under section
30 of the Act, before the assessment is confirmed,
reduced, enhanced or annulled, or
(d) ....................... .
(e) ........................ ".
The decision of the Income-tax Officer in regard to
the invalidity of the deed of partnership inasmuch
as it did not bear the signature of Gokulchand was
not challenged by the appellant at any stage. of the
proceedings nor in the statement of case before us.
Counsel for the1appellant, however, relying on a passage in the "L~w and Practice of Income-tax by
Kanga and Palkhivala'', 3rd Ed., at page 754, urged
that it was not necessary that the partnership agreement should be signed by all the partners and if the
agreement had not been signed by one of the partners
but that partner had assented to the agreement and
put it forward along with the other partners for
registration, the agreement would be admissible for
registration. In the first instance, it was not open to
the appellant to urge any point which was not taken
in the statement of case and even if it was open to
him to urge that contention we do not think it necessary to express any opiqion on the correctness or
otherwise of the statement above referred to in view
of the construction which we put on Rule 2 of the
Indian Income-tax Rules, 1922.
The Rules were framed under .section 26-A(2) of
the Act and had statutory force.
Under Rule 2, the
a,pplication for registration of the firm was to be
made to the Income-tax Officer and the particulars
contained in the Instrument of Partnership specifying the individual shares of the partners w.ere to be
registered with him on an application made in that
behalf signed by all the partners (not being minors)
personally.
No such application was submitted to
the Special Income-tax Officer in this case before he
-
S.C.R.
SUPREME COURT REPORTS
97
made his order on the 18th March 1944, and, on the
1956
materials as they stood on record then, the order of M
-P ,,
.
Offi
c
l .
'fi d
essrs
rataJ!mal
the Special Income-tax
cer was periect y JUStl e .
Luxmichana
No such application signed by all the partners of the
v.
firm including Gokulchand was also available before Commissioner of
the Appellate Assistant Commissioner when he heard
Income-tax,
the appeal on the 20th March 194 7.
The appellant Madhya Pradesh
contended that he had in fact filed in the office of the
Bhagu·ati J.
Appellate Assistant Commissioner on the said 20th
March 1947 three applications one of which was such
an application signed by all the partners personally
including Gokulchand and it was strenuously urged
on his behalf that the Appellate ·Assistant Commissioner passed his order dated the 17th February 1948
ignoring the said application which had been filed in
his office. It was urged that, if the Appellate Assistant Commissioner had before him the said application dated the 20th March 1947 signed by all the partners personally including Gokulchand, it was his duty
to direct a registration of the firm himself without
anything more inasmuch as the deed of partnership
had been signed by Gokulchand on the 9th January
1945 and the application for registration of the firm
dated the 20th March 1947 bore his signature.
The
direction given by the Appellate Assistant Commissioner to the Income-tax Officer to register the firm
was, it was contended, therefore proper and we were
asked to treat the words "after obtaining the signature of Seth Gokulchand in the application for registration and in the deed of partnership" as superfluous.
.
We are not impressed .with this argument. Asappears abundantly clear from the terms of the order
made by the Appellate Assistant Commissioner himself and also from the statement of case prepared by
the Tribunal, the application signed by all the partners personally including Gokulchand was not before
the Appellate Assistant Commissioner.
An application had been made by the appellant before the Tribunal to amend the statement of case by deleting
from para 6 thereof the words ''no application was
submitted to the Appellate Assistant Commissioner
13
1956
'lrlessrs Pratap,,.,,z
Luxtnial1and
v.
Co11•1t1issionet' o/
lncoine-tax,
lvladl1ya Pradesh
BhagwatiJ.
98
SUPREME COURT REPORTS
[1956]
seeking his permission under Rule 2(c) of the Indian
Income-tax Rules" but the same had been rejected
by the Tribunal as a result of proper investigation
conducted by it subsequently, the Tribunal stating
that they were satisfied that the assessee did not appear to have put in an application dated the 20th
March 1947 as alleged.
The reference was heard by
the High Court on this statement of case prepared
by the Tribunal and no steps were taken by the appellant before the High Court for having the statement of case amended by the Tribunal or for having
a further statement of case submitted by the Tribunal
recording therein the facts alleged by the appellant.
We must, therefore, decide this appeal on the facts
stated in the statement of case by the Tribunal and
on the basis that the application for registration
dated the 20th March 1947 signed by all the partners
personally including Gokulchand was not before the
Appellate Assistant Commissioner.
If that was the position, the only power which the
Appellate Assistant Commissioner had under Rule
2(c) was to accord permission to the appellant to
make the application in proper form to the Incometax Officer signed by all the partners personally including Gokulchand before the assessment was confirmed, reduced, enhanced or annulled.
The Appellate Assistant Commissioner had, under the Rule, no
power to direct the Income-tax Officer to register the
firm after obtaining the signature of Gokulchand both
in the application for registration and in the deed of
partnership as he did. As a matter of fact the appellant did not ask for such permission from the Appellate Assistant Commissioner nor was any revision
taken by the appellant before the Commissioner under
section 33-A of the Act against the said order of the
Appellate Assistant Commissioner. The appellant
contented himself with arguing that the order made
by the Appellate Assistant Commissioner was justified
and the sole controversy which arose between the
parties and was the subject matter of ~he referred·
question was whether the Appellate. Assistant Commissioner was legally competent to direct the Income-
S.C.R.
SUPREME COURT REPORTS
99
tax Officer to register the firm after obtaining the
1956
sigi;iatur~ of Gokdu~chahnd dbotdh inf the atpplich~tionTfhor Muwa Pratapmal
reg1strat10n an m t e
ee
o par ners i.p.
e
!.u%michantl
appellant attempted no doubt to have the words
v.
"after obtaining the signature of Seth Gokulchand
Commisaionerof
both in ·the application for registration and in the
Income-tax,
deed of partnership" deleted from the referred quesMadhya Pradesh
tion. '!'hat attempt, however, failed and no steps
BhagwatiJ.
were tsken by the appellant before the High Court
at the hearing of the reference to either have the
referred question amended or reframed in order to
bring into prominence his contention in regard to the
powers of the Appellate Assistant Commissioner.
On the question as framed, the only answer which
the High Court could give was that the Appellate
Assistant Commissioner was not legally competent to
direct the Income-tax Officer to register the firm after
obtaining the signature of Gokulchand both in the
application for registration and in the deed of partnership. Rule 2(c) above-quoted did not empower
the Appellate Assistant Commissioner to do anything
of the sort and we are of the opinion that the answer
given by the High Court in the negative was, therefore, correct.
Counsel for the appellant tried to support his argument by referring to the provisions of the earlier partnership deeds between the several partners of this
firm in the years 1929and1941 which specifically provided that in the event of retirement, or death of, or
relinquishment, of his share by a partner; the partnership will not be dissolved but will be continued,
in case of death of any of the partn.ers, by such of the
partners as remained and the legal representatives or
nominees of the deceased partner and in the case of
retirement of any of the partners by such of the partners as remained. We fail to understand what bearing these clauses have on the determination of the
referred question. In the result, the appeal of the
appellant fails and must stand dismissed with costs.