CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 471 to 476 of 1970. Appeals by special leave from the judgment and order dated July 29, 1969 of the Andhra Pradesh High Court in Referred Case No. 34 of 1965. M. C. Chagla, K. Mangachary, A. K. Verma, J. B. DadachanjiO. C. Mathur and Ravinder Narain for the appellant. B. B. Ahuja, S. P. Nayar and R. N. Sachthey, for the respondent. The Judgment of the Court was delivered by HEGDE J. These are connected appeals. A common question of law arises in these appeals. That question is :
"Whether on the facts and in the circumstances
of the case, the assessee firm is entitled to
registration under s. 26A of the Act." Application under S. 26A of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act) relating to assessment years 1956-57 to 1961-62, relevant accounting years being calendar years 1955, 1956, 1957, 1958, 1959 and 1960 were made by the appellant to the Income-tax Officer. The Income-tax Officer accepted the application relating to the assessment year 1956-57 and granted the registration asked for, by his order dated 30-6-1960. At the same time he granted renewals of the registration in respect of other assessment years. But the Commissioner of Income-tax in exercise of his, powers under S. 33-B of the Act called for and examined the-papers of the case and after hearing the assessee set aside the orders made by the Income-tax Officer. The assessee took up the matter in appeal to the Income-tax Appellate Tribunal. The Tribunal rejected its appeal. Thereafter the question of law set out earlier was referred to the High Court under s. 66(1) at the instance of the assessee. The High Court answered that question in the negative, and in favour of the Revenue. Hence these appeals by special’ leave. The assessee firm was constituted under a deed of partnership dated 5-2-1955; but the deed shows that the firm came into existence on January 1, 1955. The firm consisted of five partners namely (1) B. Satyanarayanamurti; (2) B. Bapaiah Pantulu; (3) B. Seetaramaiah; (4) B. Subrahmanyam and (5) B. Rammonanrao. The last one was a minor. The partnership deed shows that he was a party to the same, being represented by his father, B. Satyanarayanamurty. One of the terms of the partnership deed is that the profit and loss of a business should be divided and borne between the partners in equal shares. The application under s. 26A for the assessment year 1956-57 was made on 30-6-1955, the last date for making the application. Along with that application, as required by the rules, a copy of the partnership deed was also sent to the Income-tax Officer. On October 18, 1955, an application was, made by the partners of the firm to the Registrar of Firms to register the firm. The Registrar,. by his letter dated December 13, 1955 objected to the registration of the firm on the ground that the partnership was invalid under s. 30 of the Partnership Act, as one of the partners was a minor. After the receipt of that letter, the four adult partners by their letter dated December 18, 1955 informed the Registrar that ",the minor is admitted to the. benefits of the partnership with the consent of all the partners. He, has nothing to do with the loss of the firm. We therefore agree to. record our consent and amend the application accordingly and send the same to the Registrar of Firms as directed." After the receipt of that letter, the Registrar of Firms registered the assessee firm, on January 10, 1956. It is not known whether a copy of that letter had been sent to the Incometax Officer and if so when it was sent. As mentioned earlier, the Commissioner of Income-tax, set aside the registration granted by the Income-tax Officer. He came to the conclusion that the partnership in question was ab initio void. He rejected the contention that the letter sent to the Registrar of Firms validated the partnership deed. He further opined that several of the terms in the partnership deed adversely affected the minor and therefore the partnership cannot be held to be valid. On appeal, the Tribunal upheld the conclusions reached by the Commissioner. In addition, it held that the applications for registration as well as for renewal did not conform to the requirements of the law and consequently they were invalid applications. The High Court, in an elaborate judgment affirmed the decision of the Tribunal that the partnership was not valid in law. It did not address: itself to the question whether the applications made, for registration and renewal were otherwise invalid. We are of opinion that the applications for registration and renewal did not conform to the requirements of the law and consequently the registration or the renewals as the case may be could not have been granted. In that view we have not thought it necessary to go into the question whether the partnership was validated as a result of the letter written by he adult partners to the Registrar of Finns on 18-12-1955. Section 26A prescribes
" ( 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 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."
Sub-s. (5) of S. 59 prescribes that
"Rules made under this section shall be
published in the Official Gazette and shall
thereupon have effect as if enacted in this
Act."
Rule 2 framed under the Act says that
"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 (hereinafter in these rules referred to
as the Act), register with the Income-tax
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 dissolved 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 (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, 1908 (XVI
of 1908), before the end of the previous year
of the firm; and
(c)where the application is or 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." The assessee firm was not registered under the Indian Partnership Act before the application under s. 26A of the Act was made nor was the partnership deed registered under the Indian Registration Act. The Partnership deed submitted along with the application for registration disclosed that the partnership constituted under that deed was void in view of s. 30 of the Partnership Act as one of the five partners was a minor. Hence the application made for registration was an invalid application. The subsequent alteration of one of the terms of the partition deed, even if validly made, cannot validate the application made because the alteration in question was made, long after the time prescribed for making the application had expired and there is nothing on record ’to show that the Income-tax Officer had condoned the delay in exercise of his power under the proviso to Rule2. If the original order of registration was unauthorised, the subsequent renewals of that registration must also be held to be, unauthorised. Rule 3 requires. the assessee to make application under that rule in the form annexed to that rule. Column 6 of the form requires the applicants to mention the "Share in the balance of ’profits (or loss) (annas and pies in the rupee)". Note 2 in that form lays down that "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 4(1) prescribes the conditions and the manner in which the Income-tax Officer can grant the certificate asked for. Sub-rule (2)of that rule says that it the conditions mentioned in sub-rule (1)are not satisfied, the Incometax Officer "shall pass an order inwriting, refusing to recognise the instrument of partnership, or-the certified copy thereof, and furnish a copy of such order to the applicants". Rule 6 lays down the form in which renewal applications were required to be made. Column 6 of that form is similar to Column 6 of the form under rule 3. Note 2 under that form is similarly worded as note 2 in the form under rule 3. It was found by the Tribunal that both in the application made for registration of the firm. as well as in the applications made for renewal of registration in column 6 of the form letter "P" was not mentioned. On the other hand the minor’s share was shown as 1/5th which means his share both in the profits as well as in the loss. As mentioned earlier, the record before us does not show whether the Income-tax Officer was informed of the letter written to the Registrar of Firms on 18-10-1955, and if so on what date he was informed about it. From the facts set out above, it is clear that the applications made by the partners of the firm did not comply with the requirements of the rules. Hence those applications cannot be considered as valid applications. In Rao Bahadur Ravulu Subba Rao and ors. v. Commissioner of Income-tax, Madras(1), Venkatarama Ayyar J. speaking for the Court observed:
"Thus, if a firm is registered, it ceases to
be a unit for purposes of taxation and the
profits earned by it are taken, in accordance
with the general law of partnership to have
been earned by the individual partners accord-
ing. to their shares and they are taxed on
their individual income including their shares
of profits. The, advantages of this provision
are obvious. The rate of tax chargeable will
not be on the higher scale provided for
(1) I. T. R. 163 at 172;
incomes on the higher levels but on the lower
one at which the income of the individual
partner is chargeable. Thus, registration
confers on the partners a benefit to which they
would not have been entitled but for section
26A, and such a right being a creature of the
statute, can be claimed only in accordance
with the statute, which confers it, and a
person who seeks relief under section 26A must
bring himself strictly within its terms before
he can claim the benefit of it. In other
words, the right is regulated solely by the
terms of the statute and it would be repugnant
to the character of such a right to, add to
those terms by reference to other laws. The
statute must be construed as exhaustive in
regard to the conditions under which it can be
claimed." This decision lays down that before a person can claim, the benefit of s. 26A, he must strictly comply with the requirements of that section. In view of sub-s. (2) of that section, he is also required to comply with the requirements of the relevant rules. Failure to comply either with the requirements of sub-s. (1) or sub-s. (2) of s. 26A, disentitles the applicant to the benefit of that section. The same view was taken by this Court in N.T. Patel & Co. v. Commissioner of income-tax, Madras("). The decision of this Court in Khanjan Lal Sewak Ram v. Commissioner of IncomeTax, U.P.(2) lends support to that conclusion. It was contended by Mr. Chagla, learned Counsel for the appellant that we should not allow technicalities to come in the way of our doing substantial justice to the parties. According to him substantial compliance with the rules set out above is sufficient to meet the ends of justice. In support of his plea he’ placed reliance on s. 185(2) of the Income-tax Act, 1961. We are unable to accede to that contention ? Section 185 (2) of the 1961 Act is not retrospective in operation nor were the requirements of that provision complied with. The plea that substantial compliance with the rules is sufficient stands negatived by the decisions referred to earlier. Yet another contention taken by Mr. Chagla was that the High Court did not base its decision on the grounds mention(1) 42 I. T. R. 224. (2) 83 I. T. R. 175., ed above; but it decided against the appellants on the ground that the partnership is ab initio void. Hence we should not take up those grounds afresh. This contention is irrelevant. As mentioned, earlier, one of the grounds on which the Tribunal upheld the order ,of the Commissioner was that the applications made did not conform to the requirements or the law. We agree with that conclusion. In the result these appeals, fail and they are dismissed. Taking .into consideration the facts and circumstances of the case, we ,direct the parties to bear their own costs in this Court. Appeals dismissed.