JUDGMENT
1. At the instance of the Revenue, the Income-tax Appellate Tribunal referred the following question relating to the assessment year 1976-77 for the opinion of this court :
"Whether, on the facts and in the circumstances of the case and on the proper interpretation of Clauses 9 and 10 of the instrument of partnership, the Appellate Tribunal was justified in law in holding that the assessee-firm was entitled to registration and in directing the Income-tax Officer to register the assessee-firm ?"
2. The assessee-firm was constituted under a partnership deed dated August 1, 1964, by Sri Jethanand Bhatia, Shri Om Prakash Bhatia, Smt. Viran Bai and Shri N.P. Bhatia. The assessee-firm was granted registration uninterruptedly for the assessment years 1966-67 to 1975-76.
3. During the accounting period, relevant to the assessment year 1976-77, one of the partners, namely, Sri N.P. Bhatia, took up a contract from the M. E. S. and declared income from that contract in his own return. Clauses 9 and 10 of the instrument of partnership dated August 1, 1964, are as follows :
"9. That any contract work taken by any partner after the formation of this partnership firm shall be treated as that of this partnership firm, and profit and loss of the said work shall be divided amongst the partners according to their shares as defined in Clause 14 below.
10. That save as above, no partner shall be authorised to do any other business on his own account, unless the other partners agree to it and allow him to do the same."
4. From a reading of the aforesaid clauses, the Assessing Officer was of the view that no partner was permitted to carry on any contract work in his own name ; that the contract from the M. E. S. was taken by one of the partners in violation of the terms, as stated in the partnership deed ; that profits from that contract have not been divided amongst all the partners and that such profits have not been taken to the account books of the firm. He, therefore, held that the firm was not genuine. He thus refused to grant registration to the assessee. It is worth noticing that income from the contract taken from the M. E. S, which was declared by Sri N.P. Bhatia (partner) in his own return, was not assessed in the hands of the firm, but only in the hands of the said partner individually.
5. The question for consideration is whether registration could be refused to the firm, simply on the ground that one of the partners, Sri N.P. Bhatia, took up a contract from the M. E. S. in his own name and declared the income thereof in his own return.
6. From a conjoint reading of Clauses 9 and 10 of the partnership deed dated August 1, 1964, it clearly appears that no partner was permitted to carry on any other business on his own account except with the consent of other partners. The Appellate Tribunal found that from the facts and circumstances of the case, it is clear that Sri N.P. Bhatia had taken up the contract from the M. E. S. with the consent of other partners and, therefore, there was no violation of Clause 10 of the partnership deed. We agree with the view taken by the Appellate Tribunal that from the facts and circumstances of the case the implied consent of other partners enabling Sri N.P. Bhatia to take up and execute the M. E. S. contract on his own account, could be gathered and thus there was no violation of the terms and conditions of the partnership deed. Registration thus could not be refused for that reason.
7. The Revenue has not raised any dispute with regard to the consent of other partners. This being so, the factual finding recorded by the Appellate Tribunal that Sri N.P. Bhatia took up the M. E. S. contract with the consent of the other partners, could not be successfully assailed.
8. The matter can be looked at from another angle also. Minus the profits from the M. E. S. contract the firm has been assessed by the Assessing Officer in respect of profits from other contracts and, therefore, it is difficult to say that the firm did not exist or did not carry on the business as per the partnership deed.
9. Nothing is pointed out by the Revenue to us to doubt the genuineness of the assessee-firm.
10. We, therefore, answer the aforementioned question in the affirmative, i.e., in favour of the assessee and against the Revenue.