Law: Income Tax Act, 1922

Section: 26A

(a) Income-tax Act (XI of 1922), S. 26-A-Two firms entering into bigger partnership-Deed of bigger partnership specifying neither the shares nor the names of partners of the two firms-Bigger partnership cannot be registered under S. 26-A. Where two firms entered into a bigger partnership and the partnership deed omitted to mention the shares, in the bigger partnership, of the partners of the two firms, as also their names by implication Held, that as, apart from the question whether under the Partnership Act a firm can legally enter into a partnership with another firm, for the purposes of the Income-tax Act the individual partners constituting the component firms are to be treated as partners of the bigger firm, unless the individual shares of the partners are specified, and by implication, names mentioned in the instrument of bigger partnership, it cannot be registered under section 26-A of the Income-tax Act. Under the provisions of section 26-A, Income-tax Act, 1922 and rule 2, Income-tax Rules, 1922 it is essential that the docu­ment required to be registered must on the face of it specify the individual shares of the partners and these should be not of the component firms but individuals having a share in it. Though these rules underwent some changes in April 1952 and in August 1954, the provisions requiring these essentials are the same. 1f the instrument of bigger partnership neither contains the names, nor specifies shares of the individual partners of the two com­petent firms, the instrument is not in accordance with the terms of section 26-A and rule 2 aforesaid and its registration may be rightly rejected. The individual shares in the new bigger partnership cannot be legitimately inferred from their shares in the smaller con­cerns when they are not mentioned in the new instrument. Seodoyal Khemka v. Joharmull Manmull (1923) I L R 50 Cal­ 549; Brojo Lal Saba Banikya v. Budh Nath Pyarilal & Co. (1928) I L R 55 Cal. 551; Ex parte Blain in re Sawers (1879) 12 Ch. D. 522 ; Sadler v. Whiteman and another (1910) 1 K B 868; Chandrika Prasad Ram Swarup v. Commissioner of Income-tax, U. P. & C. P., 7 I T R 1939 p. 269 and Messrs Jai Dayal Madan Gopal…

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