JUDGMENT MANCHANDA J. - This is a case stated under section 66(2) of the Income-tax Act, 1922. The question referred is :
"Whether, on the facts and in the circumstances of the case, the assessee-firm was entitled to registration under section 26 ?"
The material facts are these : The assessee is a firm. It consisted of four adult and one minor. The relevant year of assessment is 1956-57. The fourth partner was one Chandrika Prasad and it was his son, Jhabboo Lal, a miner, who was said to have been admitted to the benefits of partnership. The firm was constituted under a deed of partnership dated 22nd October, 1949. The preamble to the partnership deed reads :
"Whereas the first, second, third, fourth and fifth parties formed a joint Hindu family and have divided their movable property by means of the award of an arbitrator dated 21st October, 1949.
And whereas the first, second, third and fourth parties have expressed a desire to carry on two business at Mirzapur and one at Unchhora in partnership....."
The relevant clauses of the deed of partnership are :
"3. That Shri Jhabboo Lal, minor, the fifth party is admitted to the benefits of partnership and his share shall be one-fifth in the business.
4. That the share of each party in the profit and loss in the partnership shall be equal. i.e., one-fifth.
7. That every partner has a right to take part in the conduct of the business, is bound to attend diligently to his duties and has a right to have access to, and to inspect and to take copies of the books of the firm.
9. That the first, second third and fourth parties may submit a dispute relating to the business of the firm to arbitration, open and operate or close a banking account on behalf of the firm, ....."
The instrument of partnership was signed by all the partners including the minor. Chandrika Prasad did not sign on behalf of the minor as his father and guardian. The assessee-firm was granted registration for the assessment year 1951-52 to 1955-56. For the relevant assessment year 1956-57, the assessee applied for renewal of registration. This application for renewal was signed by the minor Jhabboo Lal and he was shown there as a partner. The Income-tax Officer refused registration relying upon clause (4) of the partnership deed which provided for the share of the minor in the same preparation as the share of profits and losses of other partners and as such the deed was held to be contrary to law. In this he was supported by a decision of the Punjab High Court in Banka Mal Lajja Ram & Co. v. Commissioner of Income-tax. The assessee then went up in appeal to the Appellate Assistant Commissioner. It was contended that the intention of the partners was only to admit Jhabboo Lal to the benefits of partnership and even if some clause of the partnership deed appeared to suggest that Jhabboo Lal was being treated as a full-fledged partner for certain purpose, such clauses should be deemed to be non-operative and the firm was entitled to registration. In support of this contention the assessee relied upon the decision of the Madras High Court in Jakka Devayya & Sons v. Commissioner of Income-tax, P. Vincent v. Commissioner of Income-tax, Dwarkadas Khetan & Co. v. Commissioner of Income-tax and Sahai Brothers v. Commissioner of Income-tax. There was undoubtedly a conflict on this point and the Appellate Assistant Commissioner preferred the view which was being taken by the Punjab and the Allahabad High Courts as against the view taken by the Madras, Patna and Bombay High Court. Thereupon, a second appeal was carried to the Income-tax Appellate Tribunal and by the time the Tribunal came to hear the appeal, the decision of the Supreme Court resolving the said conflict had been delivered in Commissioner of Income-tax v. Dwarkadas Khetan & Co. Accordingly, the appeal was dismissed. Hence, this reference at the instance of the assessee.
Learned counsel for the assessee contends that the deed should be read as a whole, and, if that was done, it would be obvious that there was only typographical error in clause (4) where all the five partners were shown to have an equal share both in profit and loss. He also relied on the course of conduct of the department in having registered this deed of partnership from 1951-52 to 1955-56. This contention has no force. The intention undoubtedly had to be gathered from the partnership deed read as a whole and as laid down by the Supreme Court in Commissioner of Income-tax v. Shah Mohandas Sadhuram, the deed of partnership must be construed reasonably. In the Supreme Court case there was, however, no clause as in the instant case regarding the sharing of loss by the minor. In Commissioner of Income-tax v. Shah Jethaji Phulchand, a decision delivered on the same date by the Supreme Court as in Shah Mohandass case, it was reiterated that the Partnership deed should be construed reasonably. In this case, although the minor was described as a full partner, nevertheless, it was, on reading all the classes of the deed, held that he was only admitted to the benefits of the partnership. In coming to this conclusion the Supreme Court was influenced mainly by the fact that in clause (9) of that agreement, the minor, though described as a partner, was not made to bear the losses of the firm. In clause (9) it was provided :
"The portion of loss to be contributed by the third party (minor) is to be borne by the first party and adjusted in the accounts."
The Supreme court, therefor, held that the minor in that case could not be held to have been a full partner. In the present case, unfortunately for the assessee, clause (4) is clear and specific that the share of each party in the profit and loss shall be equal, i.e., one-fifth. If this one-fifth share had not been specified, then there might have been something for the assessee to hang his argument upon but even if clause (4) could have been considered to be ambiguous, the ambiguity was cleared by specifically adding that the meaning of the word "equal" was "one-fifth share". It is, therefore, not possible to read the word "one-fifth" as a mere typographical error or an error of drafting, as such an error could not reasonably have been made. If it was intended that the share of loss of the partners other than the minor should be one-fourth, then too there is no explanation why the other partners who for the reason that they were all separated members of the erstwhile Hindu undivided family, should have agreed to bear the losses which fell to the share of the minor. At best, the father, even though he was separate from the minor, may have taken on the share of loss of the minor, but, in that event, his specific share in the loss would have had to be specified and this would then not have been one-fourth but some different fraction. Therefore, "one-fifth" could not have been the result of a typographical error but was deliberately entered. In these circumstances, the interpretation placed upon the partnership deed by the Tribunal cannot be said to be an unreasonable or impossible one. Dwarkadas Khetans case has, therefore, been rightly relied upon by the Tribunal in rejection the claim for renewal of registration by the assessee. The line of cases, particularly of the Madras High Court, in Jakka Devayyas case, and the Patna and the Bombay views in Dwarkadas Khetans case, were specifically overruled by the Supreme Court, and it is no longer possible for the assessee to derive any comfort therefrom. It is also not possible to require the contract for the parties and to hold, as submitted by the learned counsel for the contract for the parties and to hold, as submitted by the learned counsel for the assessee, that at least the firm of four partners ought to have been granted registration. The Supreme Court in Dwarkadas Khetans case has specifically negatived any such possibility. It was observed at page 533 :
"Registration can only be granted of a document between persons who are parties to it and on the convenants 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."
For the reasons given above, the question referred is answered in the negative and against the assessee. In the circumstances of the case, we leave the parties to bear their own costs. Counsels fee is assessed at Rs. 200.
Question answered in the negative.