# THE COMMISSIONER OF INCOME-TAX, BOMBAY v. M/S. DWARKADAS KHETAN & CO

- **Citation:** [1961] 2 S.C.R. 821
- **Court:** Supreme Court of India
- **Decided:** 1961
- **Bench:** J. L. Kapur, M. Hidayatullah, J. c. SHAH
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-commissioner-of-income-tax-bombay-v-m-s-dwarkadas-khetan-co-2050
- **Pages:** 8

## Headnote

Income Tax -
Partnership firm including minor, if can be
registered- Indian Income-tax Act, I9ZZ (II of I9ZZ), s. z6AIndian Partnership Act, I93Z (IX of I9JZ), s. 30. ·
One of the persons who entered into a partnership was a
minor and in the instrument of partnership he was described as
a full partner with equal rights and obligations with the other
adult partners. The deed of partnership which was signed by
the minor was produced before the Registrar of Firms for registration and he granted a certificate showing the minor as a full
partner and not as one entitled merely to the benefts of the
partnership. The Income-true Officer, however, refuse<.! to register the firm under s. 26A of the Indian Income-tax Act and his
decision was upheld by the Income-tax Authorities and the
Income-tax Appellate Tribunal. The High Court differed from
the Tribunal and held that the J)rm should be registered. On
appeal by the Commissioner of Income-tax,
Held, that the Rules framed under s. 26A quite clearly show
that a minor who is admitted to the benefits of partnership
need not sign the application for registration. 'The law requires
all partners to sign the application, and if the definition were to
be carried to the extreme, even a minor who is admitted to the
benefits of partnership would be competent to sign such an
application. The definition is designed to confer equal benefits
upon the minor by treating him as a partner; but it does not
render a minor a competent and full partner. For that purpose,
the law of Partnership must be considered, apart from the definition in the Income-tax Act.
Section 30 of the Indian Partnership Act clearly_ lays down
that a minor cannot become a partner, though with the consent
of the adult partners, he may be admitted to the benefits of
partnership.
Any document which goes beyond this section
cannot be regarded as valid for the purpose of registration.
Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If
the Income-tax Authorities register the partnership as between
the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the Incometax Authorities to register a document which is different from
the one actually executed and asked to be registered.
Hoosen Kassam Dada v. Commissioner of Income-tax, Bengal,
(1937] 5 I.T.R. 182, Hardutt Ray Gajadhar Ram v. Commissioner of
104
D1cember r.
822
SUPREME COURT REPORTS
[1961)
.1960
lnaome-tax, [1950) 18 I.T.R. I06, Banka Mal Lajja Ram and Co .
v. Commissioner of Income-tax, [1953) 24 I.T.R. 150, approv7'he Cotnmissione7 ed.
of /ncomewta~,
Bon1bay
v.
Af /s. Dwarkadas
Khetan & Co.
] akka Devayya and Sons v. Commissioner
[1952] 22 I.T.R. 264, disapproved.

## Text

2 S.C.R. SUPREME COURT REPORTS
821
THE COMMISSIONER OF INCOME-TAX,
BOMBAY
v.
M/S. DWARKADAS KHETAN & CO.
(J. L. KAPUR, M. HIDAYATULLAH and J. c. SHAH, J.J.)
Income Tax -
Partnership firm including minor, if can be
registered- Indian Income-tax Act, I9ZZ (II of I9ZZ), s. z6AIndian Partnership Act, I93Z (IX of I9JZ), s. 30. ·
One of the persons who entered into a partnership was a
minor and in the instrument of partnership he was described as
a full partner with equal rights and obligations with the other
adult partners. The deed of partnership which was signed by
the minor was produced before the Registrar of Firms for registration and he granted a certificate showing the minor as a full
partner and not as one entitled merely to the benefts of the
partnership. The Income-true Officer, however, refuse<.! to register the firm under s. 26A of the Indian Income-tax Act and his
decision was upheld by the Income-tax Authorities and the
Income-tax Appellate Tribunal. The High Court differed from
the Tribunal and held that the J)rm should be registered. On
appeal by the Commissioner of Income-tax,
Held, that the Rules framed under s. 26A quite clearly show
that a minor who is admitted to the benefits of partnership
need not sign the application for registration. 'The law requires
all partners to sign the application, and if the definition were to
be carried to the extreme, even a minor who is admitted to the
benefits of partnership would be competent to sign such an
application. The definition is designed to confer equal benefits
upon the minor by treating him as a partner; but it does not
render a minor a competent and full partner. For that purpose,
the law of Partnership must be considered, apart from the definition in the Income-tax Act.
Section 30 of the Indian Partnership Act clearly_ lays down
that a minor cannot become a partner, though with the consent
of the adult partners, he may be admitted to the benefits of
partnership.
Any document which goes beyond this section
cannot be regarded as valid for the purpose of registration.
Registration can only be granted of a document between persons who are parties to it and on the covenants set out in it. If
the Income-tax Authorities register the partnership as between
the adults only contrary to the terms of the document, in substance a new contract is made out. It is not open to the Incometax Authorities to register a document which is different from
the one actually executed and asked to be registered.
Hoosen Kassam Dada v. Commissioner of Income-tax, Bengal,
(1937] 5 I.T.R. 182, Hardutt Ray Gajadhar Ram v. Commissioner of
104
D1cember r.
822
SUPREME COURT REPORTS
[1961)
.1960
lnaome-tax, [1950) 18 I.T.R. I06, Banka Mal Lajja Ram and Co .
v. Commissioner of Income-tax, [1953) 24 I.T.R. 150, approv7'he Cotnmissione7 ed.
of /ncomewta~,
Bon1bay
v.
Af /s. Dwarkadas
Khetan & Co.
] akka Devayya and Sons v. Commissioner
[1952] 22 I.T.R. 264, disapproved.
CIVIL APPELLATE JURISDICTION: Civil
328 of 1959.
of Income-tax,
Appeal No.
Appeal by special leave from the judgment and
order dated 23rd February, 1956, of the Bombay High
Court in Income-tax Reference No. 34 of 1955.
K. N. Rajagopala Ayyangar and D. Gupta, for the
appellant.
Rameshwai· Nath, S. N. Andley, J.B. Dadachanji
and P. L. Vohra, for the respondent.
1960. December 1.
The Judgment of the Court
was delivered by
Hidayatullah J.
HIDAYATULLAH, J.-The Commissioner of Income.
tax has filed this appeal, with special leave, against
the judgment and order of the High Court of Bombay,
by which the High Court answered two questions
referred to it in favour of the respondents, Messrs.
Dwarkadas Khetan & Co., Bombay. These questions
were:
"(1) Whether the instrument of partnership dated
27-3-1946 created a deed of partnership?
(2) If the answer to question No. 1 is in the
affirmative, wheth~r the fact that on 1-1-1946 there
was no firm in existence would be fatal to the applicatior for registration of the firm under Section 26A of
the Indian Income-tax Act or whether the firm could
be registered with effect from 26-3-1946 if it is held
that the firm was genuine?"
Prior to January 1, 1945, there was a firm called
Dwarkadas Khetan & Co.
On that date, the firm
ceased to exist, because the other partners had previously withdrawn, and it came to be the sole proprietory concern of Dwarkadas Khetan. On February
12, 1946, Dwarkn.das Khetan obtained the selling
agency of S,. ksaria Cotton Mills, Ltd. On March 27,
1946, he' ;icered into a partnership with three others
f
2 S.C.R. SUPREME COURT REPORTS
823
by an instrument of partnership executed that day.
i96o
Those three others were Viswanath Purumul, Govind. Th c
. .
•
e
011111uss1oner
ram Khetan and Kantilal Kasherdeo. Dwarkadas of Income-tax
Khetan's share in the partnership was 7 annas in the
Bombay
'
rupee, while the remaining 9 annas' share was divided
v.
equally among the three others. Though Kantilal M /s. Dwa•kadas
Kasherdeo was a minor, he was admitted as a full
Khetan & Co.
partner and not merely to the benefits of the partnerHidayat1tllah J.
ship, as required by s. 30 of the Indian Partnership
Act.
To the instrument of partnership, Kantilal
Kasherdeo was also a signatory, though immediately
after his signature there was the signature of one
Kasherdeo Rungta, the natural guardian of the minor.
In the instrument, Kantilal Kasherdeo was described
as a full partner entitled not only to a share in the
profits but also liable to bear all the losses including
loss of capital. It was also provided that all the four
partners were to attend to the business, and if consent
was needed, all the partners including the minor had
to give their consent in writing. The minor was also
entitled to manage the affairs of the firm, including
inspection of the account books, and was given the
right to vote, if a decision on votes had to be taken.
In short, no distinction was made between the adult
partners and the minor, and to all intents and pur.
poses, the minor was a full partner, even though under
the partnership law he could only be admitted to the
benefits of the partnership and not as a partner.
The deed of partnership was produced before the
Registrar of Firms showing the names of the four
partners. The Registrar of Firms granted a registration certificate, and in the certificate, Kantilal Kasherdeo was shown as a full partner and not as one entitled merely to the benefits of the partnership. Banks
were also informed about the four partners, and it
does not appear that to them intimation was sent that
one of the named partners was a minor. Though the
partnership came into existence on March 27, 1946,
the firm was stated to have started retrospectively
from January 1, 1946. It may be pointed out that the
firm has the calendar year as its account year, and the
matter before us refers to the account year, 1946 corresponding to the assessment year, 1947-48.
824
SUPREME COURT REPORTS
[1961)
i96o
For purposes of that year, registration of the firm
Th
C-. .
was sought under s. 26A of the Indian Income-tax
e
omnussioner
of Income-tax, Act. The Income-tax Officer refused to accord
Bombay
registration on the ground that a minor had been
v.
admitted as a partner contrary to law, and that the
M /s. Dwarkadas deed could not, therefore, be registered. The appeal to
Khetan "' co. the Appellate Assistant Commissioner also failed, the
Hidayatullah J. Commissioner holding that registration could only be
of a legal or valid document and not of a document
which was invalid in law. An appeal was then taken
to the Tribunal, and it was contended that the document must be construed as showing only that the minor
was admitted not as a full partner but to the benefits
of the partnership. The Accountant Member held that
the order of the Appellate Assistant Commissioner was
correct, giving two reasons. The first was that the
construction sought to be placed upon the document
was not open, and the second, that since retrospective
operation was given to the firm even though no firm
existed from January I, 1946, registration could not be
granted. The Judicial Member differed from the
Accountant Member, holding, as was contended, that
the document must be construed as showing merely
that the minor had been admitted to the benefits of
the partnership. The appeal was then placed before
the President, who agreed with the conclusion of the
Accountant Member, with the result that the refusal
to register the firm under s. 26A by the authorities
was upheld.
Two questions were then posed for the decision of
the High Court. The High Court differed from the
Tribunal, and answered both the questions in favour
of the assessee. In so far as the second question is
concerned, the matter is now settled by the decision of
this Court in R. G. Mitter & Sons v. Commissioner of
Income-tax (1). But, in our opinion, the decision of the
High Court on the first question was not correct, and
the correct answer does not leave the second question
open at all.
There is a distinct cleavage of opinion among the
High Courts on this point. The Bombay, Madras and
(1) (1959) 36 l.T.R. 194.
•
2 S.C.R. SUPREME COURT REPORTS
825
Patna High Courts have held that where a minor is
r96o
admitted as a full partner by adult partners, the docu-
. .
ment can be registered after interpreting it to mean The Commi.ssione'
h .
h
.
h
b
d •t d t
h b
fit
f
of lncome-ta:r,
t at t e mmor
as een a mi te
o t e ene s o
Bombay
partnership and not as a full partner. The Calcutta,
v.
Allahabad and Punjab High Courts have taken a con- M/s. Dwarkadas
trary view. The Bombay case is the one which is
Khetan & Co.
under appeal, and the Patna High Court followed that H'd
~-;
1 ,. J
decision and the two earlier decisions of the Madras
• aya " a
·
High Court. The Madras High Court decisions are of
the same Divisional Bench, and were pronounced on
the same day. The leading case in support of the
respondents is the Madras decision reported in Jakka
Devayya and Sons v. Commissioner of Income-tax (1),
and that case alone needs to be considered, because all
the reasons on which the cases on this side have proceeded are given there. In that case, there were three
partners, one of whom was a minor. They formed a
Hindu undivided family; later, a deed of partnership
was executed in which the minor was represented by
his father-in-law. It was held that the fact that the
minor was included as a partner did not ma,ke the
partnership as between the two adult partners invalid,
and that the minor must be deemed to have been
ad_mitted to the benefits of the partnership by the two
adults. The learned Judges referred to the provision
of s. 2 (6-B) of the Income-tax Act, where it is provided:
" "Partner" includes any person who being a
minor has been admitted to the benefits of partnership;",
and observed that in view of this definition and the
fact that a minor could be admitted to the benefits of
partnership under s. 30, the document was not in- .
valid, but must be read as giving to the minor the
rights laid down by the Partnership Act. They also
observed that too rigid a construction need not be put
upon the deed, and referred to Lindley on Partnership,
11th Edn., p. 87 and A. Khorasany v. C. Acha and
Others (2).
The other cases which we need not
examine are Vincent and Others v. Commissioner of
(1) [1952] 22 I.T.R. 264.
(2) ( 1928) I.L.R. 6 Ran. 198 •
826
SUPREME COURT REPORTS
[1961)
z96o
Income-tax (1} and Sakai Brothers v. Commissioner of
.
--. .
Income-tax(').
1 he Commwioner
On the other hand, there is a decision of the Calof Income-ta•
tt H" h C
t
rt d • H
K
D. ad
Bo•ibay
' cu a
1g
our repo e m
oosen
assam
av.
v.
Commissioner of Income-tax, Bengal('), in which CosM/s. Dwarkadas tello and Panckridge, JJ. have held that under s. 26A
Khet•• & Co. of the Income-tax Act and the Rules, the Income-tax
Officer is only empowered to register a partnership
llidayatullah J. which is specified m the instrument of partnership
and of which registration is asked for.
The learned
Judges, therefore, hold that it is not open to the
Department to register a partnership different from
that which is formed by the instrument. In Hardutt
Ray Gajadhar Ram v. Commissioner of Income-tax('}
Malik, C. J. and Seth, J. hold that where a minor is
admitted as a full partner with equal rights and obligations with adults, the deed is invalid. It is pointed
out that the English law on the subject is different.
In that case, however, there was one other ground for
invalidating the deed, because the minor had been
adopted into another family and his natural father
who had signed as his guardian in the deed could not
do so, as he had ceased to be the natural guardian.
The decision, however, supports the case of the Commissioner.
In Banka Mal Lajja Ram & Go. v. Commissioner of
Income-tax('), it is held that a minor cannot be a partner, and that the partnership which admits a minor
as full partner cannot be registered. It is true that in
that case the High Court did not consider the question
whether the partnership should have been taken to be
a valid partnership consisting of the adult partners,
because no such question was referred. The decision,
however, is against a claim for registration of such a
document.
In our opinion, the Calcutta view is preferable to
the view taken by the Madras High Court. The error
in the Madras view is in using the definition to show
that a deed including a minor as a competent partner
(1) [1952] 22 I.T.R. 285.
(2) [1958] 33 I.T.R. 40.
(3) (t937] 5 I.T.R. 18z.
(4) [1950] 18 I.T.R. Io6.
(51 [1953] 24 I.T.R. 150.
2 s.c.R. SUPREME COURT REPORTS
827
is valid. What the definition does is to apply to a
z96o
minor admitted to the benefits of partnership all the The Commissioner
provisions of the Income:tax Act applicable to partof Income-tax,
ners. The definition cannot be read to mean that in
Bombay
every case where a minor has, contrary to law, been
v.
admitted as a fulllartner, the deed is to be regarded as M /s. Dwarkadas
I'd b
th 1
•
b
d 'tt d
Khelan c;. Co.
va 1 , ecause, un er
e aw, a minor can ea m1 e
to the benefits of partnership. The Rules which have Hiday-;;;ullah J.
been framed under s. 26A quite clearly show that a
.
minor who is admitted to the benefits of partnership
need not sign the application for registration. The
law requires all partners to sign the application, and
if the definition were to be carried to the extreme,
even a minor who is admitted to the benefits of partnership would be competent to sigl). such an application. The definition is desig,ned to confer equal benefits upon the minor by treating him as a partner; but it
does not render a minor a competent and full partner.
For that purpose, the law of Partnership must be considered, apart from the defii;iition in the Income-tax
Act.
Section 30 of the Indian Partnership Act clearly
lays down that a minor cannot become a partner,
though with the consent of the adult partners, he may
be admitted to the benefits of partnership. Any document which goes beyond this section c.annot be regarded as valid for the purpose of rt)gistration. Registra.
tion can only be granted of a document between persons who are parties to it and on the covenants set
out in it. If the Income-tax Authorities register the
partnership as between the adults only contrary to the
terms of the document, in substance a new contract is ·
made out. It is not open to the Income-tax authorities to register a document which is different from the
one actually executed and asked to be registered. In
our opinion, the Madras view cannot be accepted.
The judgment under appeal has followed the
Madras view, and, in our opinion, it falls into the
same error in which the Madras High Court had fallen
earlier. The answer to the first question should,
therefore, have been in favour of the Department.
The answer given by the High Court is vacated, and
828
SUPREME COURT REPORTS
[1961]
r960
the question will now be answered in the negative. As
already stated, there is no need to answer the second
The Conirnissioner
.
h' h d
t
·
. of Juconie-tax,
question, W lC
OeS IlO
arl~e.
Bambay
The appeal is allowed with costs here and in the
v.
High Court.
Jl.1 /s. Dwarkadas
J(hetan .s- Co.
Appeal allowed.
_Hidayatullah } ,
Dece111ber I.
LT. COL. KHAJOOR SINGH
v.
THE UNION OF JftDIA & ANOTHER.
(B. P. SINHA, c. J., J. L. KAPUR,
P. B. GAJENDRAGADKAR, K. SUBBA RAO,
K. N. WANCHOO, K. C. DAS GUPTA and
J. c. SHAH, JJ.)
Fundamental Right, Enforcement of-Power of High Court to
issue writs against the Government of India-Constitution of India,
Arts. 3z(2A). 226.
The High Court of Jammu and Kashmir, relying on the
decisions of this Court in Election Commission, India v. Saka
Venkata Subba Rao, [1953] S.C.R. rr44 and K. S. Rashid and Son
v. The Income Tax Investigation Commission etc., [1954] S.C.R.
738, dismissed an applicatbn for a writ made by the appellant
against the Union of India and Anr. under Art. 32(2A), the relevant provisions of which are in the matter of enforcement of
fundamental rights the same as in Art. 226 of the Constitution,
on the preliminary objection that the said application was not
maintainable against the Union of India as it was outside the
territorial jurisdiction of that Court. The appellant's case was
that he was holding the substantive rank of Lieut. Col. in Jammu
and Kashmir and had the right to continue in service until he
attained the age of 53 on November 20, r96r, but was prematurely retired by a Jetter issued by the Government of India on
July 31, 1954, without any allegation or charge and in contravention of Art. 16(r) of the Constitution.
Held, that there can be 'no doubt as to the correctness of
the decisions relied on by the High Court and the appeal must
fail.