# Road Lines Corporation v. Commissioner of Income-tax, Kera/a 51 J.T.R

- **Citation:** [1971] 3 S.C.R. 365
- **Court:** Supreme Court of India
- **Decided:** 1971-01-15
- **Case number:** ; Civil Appeal No. 545 of 1967
- **Bench:** J. c. SHAH, K. s. HEGDE, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/road-lines-corporation-v-commissioner-of-income-tax-kera-a-51-j-t-r-5209
- **Pages:** 5

## Headnote

Income-tax Act, 1922, s. 26A-Income-ta!< Rules, r. 2(b)-Indian
Partnership Act, 1932, ss. 58, 59, 69-Rule 2(b) 11taviding 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 Parwrship
Act not on date of receipt of app/iCQ/ion under a. 58 but when entry is
made in register of firms under s. 59--:-IJ such an entry is made after end
of 'previous year' firm is not registered under the Partnership Act for the
purpose of r. 2(b).
Tue 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. Tue assessee filed an application under s. 26A of the Act for
registratlon of the firm for the assessment year 1956-51. The previous
year of the firm was shown as the year ending October 26, 1955. The
application was received by the Income-tax Officer ·an October 14, 1955.
On October 20, 1955 the assessee filed before the Regiatrar df Firms a
statement under s. 58 of the Indian Partnership Act, 1932. On November
2, 1955 the Registrar of Firrmr1iled the statement of ~he assessce 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. 26A 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 t!fe 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.
HELD : (i) The view taken by the High Court was not correct. Under
the Partnership '•w it can be taken to have been settled by decisioRs 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
;. 58(2) is not to be read in isolation and has to be considered along with
the scheme df 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-OJ
H
Ram Prarttd v. Kamta Prasad, A.LR. 19l5 All. 898, Danmal Parshotamadas v. Haburam Chhotelal. I.L.R. [1936) 58 All. 495 and Kera/a
Road Lines Corporation v. Commissioner of Income-tax, Kera/a 51 J.T.R.
71 1, approved.
366
SUPREME COURT REPORTS
[1971 J3 S.C.R.
(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 purpo"' of construing the provisions of the Act. [1369 Bl

## Text

-•
365
A €0MMISSIONER OF INCOME-TAX, ANDHRA PRADESH,
HYDERABAD
B
c
D
E
F
G
v .
.JAYALAKSHMI RICE AND OIL MILLS CONTRACTOR CO.
January 15, 1971
[J. c. SHAH, C.J., K. s. HEGDE AND A. N. GROVER, JJ.]
Income-tax Act, 1922, s. 26A-Income-ta!< Rules, r. 2(b)-Indian
Partnership Act, 1932, ss. 58, 59, 69-Rule 2(b) 11taviding 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 Parwrship
Act not on date of receipt of app/iCQ/ion under a. 58 but when entry is
made in register of firms under s. 59--:-IJ such an entry is made after end
of 'previous year' firm is not registered under the Partnership Act for the
purpose of r. 2(b).
Tue 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. Tue assessee filed an application under s. 26A of the Act for
registratlon of the firm for the assessment year 1956-51. The previous
year of the firm was shown as the year ending October 26, 1955. The
application was received by the Income-tax Officer ·an October 14, 1955.
On October 20, 1955 the assessee filed before the Regiatrar df Firms a
statement under s. 58 of the Indian Partnership Act, 1932. On November
2, 1955 the Registrar of Firrmr1iled the statement of ~he assessce 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. 26A 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 t!fe 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.
HELD : (i) The view taken by the High Court was not correct. Under
the Partnership '•w it can be taken to have been settled by decisioRs 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
;. 58(2) is not to be read in isolation and has to be considered along with
the scheme df 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-OJ
H
Ram Prarttd v. Kamta Prasad, A.LR. 19l5 All. 898, Danmal Parshotamadas v. Haburam Chhotelal. I.L.R. [1936) 58 All. 495 and Kera/a
Road Lines Corporation v. Commissioner of Income-tax, Kera/a 51 J.T.R.
71 1, approved.
366
SUPREME COURT REPORTS
[1971 J3 S.C.R.
(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 purpo"' of construing the provisions of the Act. [1369 Bl
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
A
B
c
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.
D
The facts are not in dispute.
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 assesse_e filed an application under ~. 26A of the Act for
registration of the firm for the assessment year 1956-57.
The
'previous year' of the fim1 was shown as the year ending October
E
26, 1955.
This application was received by
the
Income-tax
Officer on October 14, 1955. On October 20. 1955 tile assessee
filed before the Registrar of Firms a statement under s. 58 o.f the
Indian Partnership Act 1932. On November 2, 1955 the Registrar of Firms filed the statem~t of the assessee and made entries
in the registrar of fimls.
On March 23, 1961 the Income-tax
F
Officer passed an order refusing to register the firm under s. 26A
1inter 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 Appellate Tribunal
also upheld the order of the Income-tax Officer and the Appellate
Assistant Commissioner. On that a refe\ence was sought and the
G
High Court answered the question referred in favour of the asses-
.~ee on the ground that the application had been filed in time.
Section 26A of the Act provicks that an application may be
made to the Income-tax Officer on behalf of any firm constituted
tmder an fostrument of pertnership specifying
the
individual
H
>hares 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
A
B
c
D
E
F
G
H
C.I.T. v. JAYALAKSHMI RICE MILLS (Grover, J.)
367
prescribed. Rubs 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) o:
or where the deed of Partnership is not registered under the Indian Registration Act, 190~
(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 whichevec·
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 1932) or where
the need of partnership is registered under the
Indian Registration Act (XVI of 1908) befor<!
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 <ietermined is whether the
registration of a firm under the Partnership Act takes plac.e with
effect from the date on which the application for registration is
made in accordance with s. 58 of that Act. Section 58 ( 1 I provides that the registration of a firm may be effected. at any time
by sending by post or delivering tu 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
3~com-
368
SUPREME COURT REPORTS
[1971]3 s.c.R.
panied by the prescribed fee stating. . . . . . . . Under s. 59 when A
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 shall file the statement. In Ram Prasad v. Kamta Prasad(') it was laid down that
the registration of . a firm under the Pertiwrship Act takes place
only when the necessary entry is made in the register of firms,
B
Even under s. 69 of the Partnership Act which deals with th.;
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 Chhotela/(2).
Thus under the Partnership law it can be takcm to have
been settled by decisions of High Courts from a long time that the C
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 D
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
tlie firm could be regarded as registered.
The Ker ~ia High
Court has in Kera/a Road Lines Corporation v. Commissioner of
Inco~·tax, Kerala( 8 ), clearly expressed the view that reading
E
SS. 58 and 5c; of the Indian Partnership Act together a firm ,cannot be said to be registered when the statement prescribed by F
. ·s. 58 and the required fee are sent to the Registrar and th11t 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 fu:!n 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 Partinership Act and reference was made
G
in particular to the statement relating to clause 58 corresponding H
(I) AIR [1935] All. 898.
(2) I.LR. [1936] 58 All. 495.
(3) 5HT.R. 711.
C.I.T. v. JAYALAKSHM! '""" MILLS (Grover, I.)
369
A 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
B for coming to the conclusion that the partnership should be deemed to have been registered on the date when the .application was
preser.ted 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.
c
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 affirmativ~ and against the
assessee. The appellant shall be entitled to costs .in this Court.
G.C.
A~ea/ al/owetf.
\.
10-L807Sup. Cl/71 .