MESSRS. R. C. MITTER & SONS vs. THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA

CIVIL APPEAL No. 85/1957Supreme Court1959 INSC 3715 April 1959Bench: 3 JudgesAuthor: BHUVNESHWAR PRASAD SINHA, J.L. KAPUR, M. HIDAYATULLAH19 pages
AI SummaryDismissed

What were the facts?

The appeals concerned the interpretation of Section 26A of the Indian Income-tax Act, 1922, regarding the registration of firms. In Appeal No. 85, the firm Messrs. R. C. Mitter & Sons was verbally constituted in April 1948, with a partnership deed drawn up in September 1949. An application for registration for assessment year 1949-50 was made thereafter. In Appeal No. 389, the firm was verbally constituted in June 1944, with a memorandum of partnership executed in June 1948. The application for registration for assessment years 1945-46 and 1946-47 was made on August 24, 1949. The Income-tax Officer rejected the applications, and the appeals to the Income-tax Appellate Tribunal were also dismissed. The High Court ruled against the assessees, holding that Section 26A contemplated a firm created by an instrument of partnership.

What did the Supreme Court hold?

The Supreme Court held that the words 'constituted under an instrument of partnership' in Section 26A of the Indian Income-tax Act, 1922, include firms that were created by instruments of partnership as well as those that were subsequently formalized by reducing the partnership terms to writing. However, the Court clarified that for registration under Section 26A, the partnership must have functioned in accordance with an instrument of partnership that was operative during the accounting year. If the partnership did not function under such a deed during the accounting year, it could not be registered for the subsequent assessment year. The Court dismissed the appeals, agreeing with the Department and the High Court in refusing registration, though for reasons that differed from the High Court's reasoning. The ratio is that while an instrument can be executed after the firm's inception, it must be operative during the accounting year for registration purposes. No issue was expressly left undecided.

What were the issues?

1. Whether the words 'constituted under an instrument of partnership' in Section 26A of the Indian Income-tax Act, 1922, require the firm to be created by an instrument of partnership, or if it can be registered if the terms are subsequently reduced to writing. (Question of law) 2. Whether an instrument of partnership must be in existence during the relevant accounting year for a firm to be eligible for registration under Section 26A. (Question of mixed law and fact) Assessee's Contentions: The assessees argued that they were entitled to registration so long as the assessment had not been made, irrespective of when the instrument of partnership came into existence. Revenue's Contentions: The Revenue contended that a firm seeking registration under Section 26A must be created by an instrument of partnership, or at least such an instrument must be in existence during the accounting year preceding the assessment year for which registration is sought.

Which sections of the Income-tax Act were involved?

Section 26A,Section 26,Section 28,Section 23,Section 66A(2)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
(2) S.C.R. SUPREME COURT REPORTS 641 The conclusion at which we have arrived is that the Act and its several provisions do not suffer from the vice of extra-territoriality in the sense .suggested by learned counsel for the respondent and there is no such conflict of jurisdiction as learned counsel for the res- pondent has suggested. Accordingly, the Act is good and applies to the Baidyanath temple and the proper- ties appertaining thereto. The result, therefore, is that the appeal succeeds

and is allowed with costs. The judgment and order of the High Court dated October 9, 1953, are set aside and the petition under Art. 226 of the Constitution made by the respondent must stand dismissed with costs.

Appeal allowed. MESSRS. R. C. MITTER & SONS v. THE COMMISSIONER OF INCOME-TAX, WEST BENGAL, CALCUTTA (B. P. SINHA, J. L. KAPUR and M. HIDAYATULL~H, JJ.)

Income-tax-Registration of firm-Procedure-" Constituted under an instrument of partnership", Meaning of-Indian Income- tax Act, r922 (XI of r922), s. 26A, Rules 2 to 6B.

The question for determination in these two appeals was whether the appellant firms were entitled to registration under s. 26A of the Indian In

The order continues below.

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