Case Summary
| Citation | CIT v. Jayalakshmi Rice and Oil Mills Contractor Co.AIR 1971 SC 1015 : (1971) 1 SCC 280 |
| Keywords | Section 58, 59 of Partnership Act, registration, partnership firm, Registrar, Income Tax Officer |
| Facts | The assessee firm was constituted under partnership deed, dated 6 Oct. 1955. Assessee filed an application for registration of the firm, application was received by Income Tax Officer on 14 Oct. 1955 and on 20 Oct. 1955, the assessee filed before the Registrar. On 2 Nov. 1955, Registrar of Firms made entries in the register. Income Tax Officer refused to register the firm under section 26A of the Income Tax Act due to the reason that application is not filed on time. The Appellate Assistant Commissioner’s appeal was dismissed. The Tribunal also supported the decision of the lower courts. The High Court ruled in favor of the assessee, holding that on the date the application is filed, the partnership should be considered registered and the rules would be satisfied if the partnership was registered under the Partnership Act after s.26A application was filed. |
| Issues | Whether the registration of the firm takes place with effect from the date on which the application for registration is made in accordance with section 58 of that Act? |
| Contentions | |
| Law Points | Court stated that according to section 58, registration is deemed to be made when application is filed but according to section 59, registration is made when entries made in the register after satisfaction of criteria fulfilled in section 58. But section 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 section 59 and 69. A partnership is registered under the Partnership Act when the requisite entry is made in the register of firms, according to Ram Prasad vs Kamla Prasad. In Kerala Road Lines Corp. vs CIT, court held that a firm cannot said to be registered under section 58 and the registration of the firm is effected only when the entry is recorded in the register. So, Court held that registration is deemed to made on Nov. 2, 1955. |
| Judgement | The appeal is granted, and the High Court’s decision is reversed. The answer to the referred question must be approbative and adverse to the assessee. In this Court, the appellant is entitled to costs. |
| Ratio Decidendi & Case Authority | Section 58. Application for registration. (1) 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 accompanied by the prescribed fee, stating– (a) the firm name, (b) the place or principal place of business of the firm, (c) the names of any other places where the firm carries on business, (d) the date when each partner joined the firm, (e) the names in full and permanent addresses of the partners, and (f) the duration of the firm. The statement shall be signed by all the partners, or by their agents specially authorised in this behalf. (2) Each person signing the statement shall also verify it in the manner prescribed. (3) A firm name shall not contain any of the following words, namely:– “Crown”, “Emperor”, “Empress”, “Empire”, “Imperial”, “King”, “Queen”, “Royal”, or words expressing or implying the sanction, approval or patronage of Government ,except [when the State Government] signifies [its] consent to the use of such words as part of the firm name by order in writing. Section 59 in The Indian Partnership Act, 1932 Registration.— When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement. |
Full Case Details
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 Section 26-A 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 Section 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 Incom-tax Officer
passed an order refusing to register the firm under Section 26-A, interalia, for the
reason that the application had not been made in time. The appeal taken to the
Appellate Assistant Commissioner by tax assessee failed. The Income-tax 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 assessee on the ground that the application had
been filed in time.
Section 26-A of the (Income Tax) 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 prescribed. Rules 2 to
6(6) of the Rules made under Section 59 of the Act deal with registration of firms
The material portion of Rule 2 reads:
“Such application shall be made…….
(a) Where the firm is not registered under the Indian Partnership Act, 1932
(IX of 1932) 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 1932) or where the deed of partnership is registered under the Indian
Registration Act (XVI of 1908) before the end of the previous year of the
firm……”
A.N. GROVER, J. – 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(6)
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 Section 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 Section 58 of that Act. Section 58(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 accompanied by the prescribed fee stating……
under Section 59 when the Registrar is satisfied that the provisions of Section 58 have been
duly complied with he shall record an entry of the statement in a register called the “register
of firms” and shall file the statement. In Ram Prasad v. Kamla Prasad [AIR 1935 All. 898],
it was laid down that the registration of a firm under the Partnership Act takes place only
when the necessary entry is made in the register of firms Even under Section 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. 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 Section 59 of the Partnership Act by the Registrar. It is
true that sub-section (1) of Section 58 employs language which without anything more may
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
Section 59 pursuant to it the registration would be effective from the date when the
application was presented. But Section 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 Section 59 and
Section 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 [51 ITR 711]
clearly expressed the view that reading Sections 58 and 59 of the Indian Partnership Act
together a firm cannot be said to be registered when the statement prescribed by Section 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 register of firms and the statement is
filed by the Registrar as provided in Section 59. In that case also an identically similar
question arose in respect of registration of a firm under Section 26-A 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 to Section 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 register 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 .The
answer to the question referred must be given in the affirmative and against the assessee.
