JUDGMENT
Ajit K. Sengupta, J.
1. At the instance of the Commissioner of Income-tax, West Bengal-IX, the following question of law has been referred to this court under Section 256(2) of the Income-tax Act, 1961, for the assessment year 1973-74 :
“Whether, on the facts and in the circumstances of the case and on a proper construction of the deed dated the twenty-sixth day of December one thousand nine hundred and sixty seven and the deed dated the twenty-fourth day of November one thousand nine hundred and seventy, the Tribunal was correct in holding that a genuine firm was in existence during the year and the same was entitled to registration ?”
2. Shortly stated, the facts are that the assessee claimed to be a partnership firm. There was a change in the constitution of the firm in the preceding year and a new deed was executed on November 24, 1970, with effect from September 1, 1970. As in the case of the earlier partnership deed, under this partnership deed also, a minor was purported to have been admitted to the benefits of the partnership. One of the clauses of the partnership deed (Clause 8) is as follows :
“The capital of the firm, as and when required, shall be provided by the partners and the minor admitted to the benefits of partnership in proportion to their respective shares. If any partner or minor fails to provide his share of the capital either in full or part, interest shall be charged from him at such rate as the partners may decide not being less than the highest rate at which the partnership may have taken loan from its bankers or any of the partners or any outside source during the year for which the accounts are made up.”
3. The deed was signed by the partners but was not signed by the guardian of the minor accepting the terms and conditions of the partnership. The assessee filed an application for registration in respect of the assessment year 1971-72 in Form No. 11A of the Income-tax Rules, 1962. The Income-tax Officer declined to grant registration for that year on the ground that registration was refused to the assessee in earlier years and that there had been no change in the relevant circumstances during the year under consideration. In the year under consideration, the assessee filed a declaration under Section 184(7) claiming the benefit of continuation of registration. As the assessee was not allowed registration for the preceding year, the Income-tax Officer declined to allow the benefit claimed.
4. Against the order of the Income-tax Officer, the assessee filed an appeal before the Appellate Assistant Commissioner, who allowed the appeal, following the orders for the assessment years 1969-70 to 1971-72.
5. The Department appealed to the Tribunal against the order of the Appellate Assistant Commissioner. The Tribunal relied on an earlier order for the earlier years and dismissed the Departmental appeal.
6. It appears that registration was initially refused on two grounds. Firstly, although the minor was admitted to the benefits of the partnership, the deed of partnership was not signed by the guardian of the minor. Secondly, the minor was also required to contribute capital and in case of failure to make contribution, the minor shall be liable to pay interest as provided in Clause 8 of the deed of partnership.
7. The first ground has no substance in view of the decision of this court in CIT v. Associate Industrial Distributors [1982] 138 ITR 304, where a contention was raised that the terms and conditions for the minor being admitted to the benefits of the partnership had not been assented to by the guardian in the instrument of partnership itself or by a separate agreement at the time the partnership came into existence and this made the partnership invalid. This court negatived that contention and held that where a minor is admitted to the benefits of the partnership, the deed of partnership need not be signed by the guardian of the minor and the fact that the deed had not been signed by such guardian would not be fatal to the validity of the deed.
8. The second ground has no merit either Clause 8 of the deed providing for contribution of capital by the minor does not militate against the existence of any genuine partnership firm. A minor can be asked along with other full-fledged partners to contribute capital and the guardian on behalf of the minor can also enter into such agreement on behalf of the minor. So long as the minor is not admitted as a full-fledged partner, the condition that the minor should also contribute capital cannot be a ground to refuse registration.
9. For the aforesaid reasons, we answer the question in this reference in the affirmative and in favour of the assessee.
10. There will be no order as to costs.
J.N. Hore, J.
I agree.