Income Tax Appellate Tribunal - Nagpur
Governor-General In Council And ... vs Mulla Mohommad Bhai And Others. on 12 April, 1944
Equivalent citations: [1945]13ITR10(NAG)
JUDGMENT
Until 1932 Mulla Fida Ali, defendant 3, was admittedly the sole proprietor of a hardware business in Nagpur carried on under the name of Mulla Fida Ali Sultan Ali. In 1932 be purported to take his three eldest sons, the first three plaintiffs, into partnership and a deed of partnership was executed on 25th July 1932. Applications based on this deed of partnership and a subsequent deed of partnership dated 14th August 1939 were made to the Income-tax authorities under Section 26-A of the Income-tax Act have the firm registered for the purposes of that Act. These applications were unsuccessful. A new deed of partnership between Mulla Fida Ali and his five sons, who are the plaintiffs in this suit, was executed on 14th August 1939 and registered with the Registrar of Firms on 28th October 1939. An application to the Income-tax Officer during the assessment for 1939-40 to have the firm registered under Section 26-A of the Income-tax Act was allowed on 20th March 1940. On 4th November 1940 there was an additional instrument of partnership. During the assessment for 1940-41 an application was made to the Income-tax Officer for renewal of the certificate of registration, but that was rejected on 11th February 1941 on the ground that there was no genuine partnership and that Mulla Fida Ali continued to be the sole owner of the business. An appeal against that order was preferred to the Appellate Assistant Commissioner, but that appeal has not yet been decided apparently because the appellants before him wished the point to remain undecided until this suit had been decided.
On 29th August 1941, the five sons of Mulla Fida Ali instituted the present suit against (1) Secretary to the Central Government, Delhi, through the Deputy Commissioner, Nagpur, (2) the Income-tax Department, Nagpur, through Income-tax Officer, Nagpur, and (3) Mulla Fida Ali in which they claim the declarations -
(1) that the business carried on under the name and style of Mulla Fida Ali Sultan Ali from 1938-39 belongs to the plaintiffs and Mulla Fida Ali as partners, (2) that the partnership between the plaintiffs and Mulla Fida Ali constituted by the deed dated 14th August 1939 is genuine, (3) that the order of the Income-tax Officer in refusing renewal of registration under R. 6B of Section 26-A of the Income-tax Act is illegal, and (4) that the Income-tax Officer, Nagpur, was incompetent to declare that the business carried on under the name of Mulla Fida Ali Sultan Ali belongs to Mulla Fida Ali.
The first two defendants contended that the Central Government could not be sued in the form in which they had been designated in the plaint. The plaintiffs asked for leave to amend the plaint so as to describe defendant 1 as the Governor-General in Council, and after contest leave was given to do so. The actual fact however the plaint remained unamended. Section 79 of the Civil Procedure Code requires that in a suit against the Central Government the party to be named as defendant is the Governor-General in Council. Though such slackness should; not have occurred we are willing to take it that defendant 1 in this suit is the Governor-General in Council. Under Order 1, Rule 3, any person may be joined as a defendant against whom any right to relief is alleged to exist, but the Income-tax Department is not a person and it has been conceded in this Court that it cannot be joined as a defendant.
The trial Court after framing certain preliminary issues, held that the Income-tax Officers order dated 11th February 1941 refusing to renew the certificate of registration was intra vires and that the present suit was barred by Section 67 of the Income-tax Act. The learned District Judge, who remanded the case to the trial court for proper disposal in accordance with law, stated that he had no doubt that the Income-tax Officer had full power to refuse to renew the certificate and that there was no room for complaint that the Income-tax Officers order was without of ultra vires. He then went on to say that the question to be decided was whether an order passed by an Income-tax Officer in the proper exercise of this powers could be challenged in a civil Court. We are no quite sure what exactly he decided on this point. He held that Section 67 of the Income-tax Act did not bar the suit because the plaintiffs were not seeking any relief in respect of the assessment but a declaration of status which would be binding on the Income-tax authorities. In the course of his coming to the conclusion that the suit was no barred by Section 67 he remarked that "if something is done illegally or a decision contrary to law is arrived at under a special Act, normally the civil Courts have power to deal with the matter" and "under the ordinary law an illegal decision would be subject to reconsideration," though previously he had apparently held that the decision of the Income-tax Officer was neither illegal nor contrary to law.
In Section 2 (6-B) of the Income-tax Act a "firm" is defined as having the same meaning as in the Indian Partnership Act; in Section 2 (14) a "registered firm" means a firm registered under the provisions of Section 26-A, and in Section 2 (16) an "unregistered firm" means a firm which is not a registered firm. A firm is assessed differently according as whether it is a registered firm or an unregistered firm. Under Section 26-A an application may be made to the Income-tax Officer on behalf of any firm constituted under an instrument of partnership specifying the individual shares of the partners for registration for the purpose of the Income-tax Officer is satisfied that there is a firm in existence constituted as shown in the instrument of partnership, then under Rule 4 of the rules under Section 26-A he shall certify that the instrument of partnership or certified copy produced before him has been registered. It will be noticed that it is the Income-tax Officer who must be satisfied that there is such a firm in existence. The certificate of registration has effect for the year only. Under Rule 6 the firm may apply to the Income-tax Officer for renewal of a certificate of registration, and under Rule 6A or 6B the Income-tax Officer may renew or cancel the certificate.
Under Sec. 30 (1) of the Income-tax Act an appeal lies to the Appellate Assistant Commissioner against the refusal by an Income-tax Officer to register a firm under Section 26A; and under Section 33 (1) any assessee objecting to an order passed by an Appellate Assistant Commissioner may appeal to the Appellate Tribunal. An order by the Appellate Tribunal on appeal is final, save as provided in Section 66 which provides for reference to the High Court in certain cases, with a further right of appeal to the Privy Council. The rules under Section 26-A make it clear that the Income-tax Officer is the proper person to decide whether registration should be allowed or refused, Registration of a firm for the purposes of the Income-tax Act is a creation of the Act itself, and the Act provides that this is a question to be decided by the tribunals under the Act. There is no ground on which it can be said that the order of the Income-tax Officer in refusing registration was illegal or without jurisdiction or that he was incompetent to hold that the business was still the sole property of Mull Fida Ali. That was virtually conceded in this Court and that was, we gather, the view of the learned District Judge.
The question remains whether the plaintiffs are entitled to a declaration against the Crown that the business carried on under the name of Mulla Fida Ali Sultan Ali belongs to the plaintiffs and Mulla Fida Ali and that the partnership constituted by the deed of 14th August 1939 is genuine. Section 42 of the Specific Relief Act states the cases in which a declaratory decree may be given. By this section any person entitled to any legal character or to any right as to any property, may institute a suit against any person deny, or interested to deny, his title to such character or right. It appears to us that the plaintiffs in this suit are not entitled to sue the Crown for these declaratory reliefs because the Crown has not denied their title, nor is it interested in doing so. The Income-tax Officer in deciding whether registration should be allowed or refused was not acting as the agent of the Crown and the Crown had no power to influence his decision. The Income-tax Officer is a tribunal set up by statute, and the remedy against any decision of is his by way of appeal, as provided in the statute. The meaning of the words "interested to deny" is not entirely clear, but we think that it must; mean that the person interested to deny a legal character or a right to any property is a person with a rival claim of some sort and with some interest resembling in its nature that of the person whose legal character or right is denied. It cannot, in our opinion, be interpreted so widely as to mean any person who might stand to gain financially or otherwise if some persons legal character or right to property were held to be not established.
For these reasons we consider that the present suit is misconceived and must fail as against the first two defendants. In the trial Court the Crown was allowed Rs. 100 only as counsels fee although a certificate for Rs. 300 was filed and in the lower appellate Court an objection was taken to that. The question of counsels fee was one for the discretion of the trial Court and we do not consider that we should interfere. The appeal is allowed with costs throughout. A counsels fee of Rs. 100, 150 and 250 will be allowed in the three Courts respectively. As defendant 3 admitted the plaintiffs claim, the plaintiffs are entitled to a declaration against him, without costs, that the business belong to them and him in partnership.
Order accordingly.