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The facts that have given rise to the appeal may briefly be stated. There are 5 firms in Sivakasi manufacturing matches under the name and style of Shenbagam Match Works, Brilliant Match Works, Manoranjitha Match Works, Pioneer Match Works and Gnanam Match Works. The total number of the partners of all the 5 firms does not exceed 1 0 or II in number. Rajamoney Nadar is the sole proprietor of Shenbagain Match Works and in the other 4 firms there are more than one partner. In the year 1948 a person from each of those firms in his representative capacity formed a partnership to carry on the business of banking and commission agents, the principal business being the marketing of the products of the different match factories in Sivakasi. When the said partnership applied for registration for the assessment year 1949-50, it was refused by the Income-tax Department on the ground that different firms could not constitute a valid partnership. Thereafter, Sankaralinga Nadar, Arumughaswami Nadar, Arunachala Nadar, Palaniswamy Nadar and Rajamoney Nadar the first four being one of the partners of their respective firms and the last being the sole proprietor of his firm, in their individual capacity entered into a part- nership for the aforesaid purpose and executed a partnership deed dated April 1, 1950. They presented the said deed of partnership to the Income-tax Officer for registration. The Income-tax Officer by his order dated October 27, 1952, re- gistered the same under s. 26A of the Act: but the Commissioner of Income-tax under s.33B of the Act, cancell-

But the Tribunal has held that the partnership is not a genuine one for the following reasons: (i) previously the firm entered into a partnership but the registration of the same was rejected; (ii) under cl. 16 of the partnership deed the firm has the right to collect the commission of the entire match production of the larger partnerships whether they effect their sales through the firm or not; (iii) the books of Gnanam Match Works show unmistakably that the capital was contributed not by Palaniswamy Nadar in his individual capacity but by the larger firm as such; and (iv) regarding the other three larger firms also the profit delivered by their representatives from the assessee firm was divided amongst all the partners according to their profit sharing ratio in the larger firms. On the other hand, the High Court found, on a construction of the relevant clauses of the partnership deed that the business was the business of the partners of the firm, alone and that the two circumstances relied upon by the Tribunal were irrelevant in acertaining whether the said partnership was real or not. We have already pointed out that the document ex facie discloses a valid partnership. The partnership was avowedly entered into by the partners in their individual capacity as their previous partnership in their representative capacity was not registered on the ground that such a part-

At the direction of the High Court of Madras Linder s. 66(2) of the Indian Income-tax Act, 1922, the Tribunal referred the following question:

"Whether on the facts and the circumstances of the case the refusal of registration of the assessee firm under s. 26-A of the Income-tax Act was correct in law?"

The High Court answered this question in the negative. Against that order, with special leave, the Commissioner of Income-tax has appealed to this Court.

The Tribunal held that the covenants in the deed of partnership and especially in paragraphs 3 and 16 viewed in the light of the entry in the books of account of Gnanam Match Works debiting the capital contributed in the name of Palaniswamy Nadar to the assessee, and not in the name of its partner, and division of the profits received from the assessee by Palaniswamy Nadar, Sankarlinga Nadar, Aru- maghaswamy Nadar and Arunachalam Nadar with others owners of their respective business, indicated that the named partners were acting as representatives of those owners. The High Court also held that cl. 16 of the partnership agree- ment did not impose any liability upon the manufacturing concerns to pay any commission as stipulated therein on the " production of the match factories". The High Court ob- served:

1922, rules 2 to 6B deal with registration and renewal of registration of firms. The application for registration has to be signed by all the partners (not being minors) personally, and the application has to be in the fornm prescribed by rule 3. The form prescribed requires the partners of the firm to disclose the names of each partner, his address, date of admittance to Partnership, and other relevant particulars including each Dartrer's share in the profits and loss, "particulars of the firm as constituted at the date" of the application, and particulars of the apportionment of the income, profits of gains or loss of the business, profession or vocation in the previous year between the partners who in that previous year were entitled to share in such income, profits or gains or loss, where the application is made after the end of the relevant previous year. If the Income-tax Officer is satisfied that there is a firm in existence constituted as shown in the instrument of partnership and the application has been properly made, he has to enter in writing at the foot of the instrument or certified copy, as the case may be, a certificate of registration of the partnership under s. 26-A of the Act. This certificate of registration ensures only for the year mentioned therein, but the firm is entitled to obtain renewal of the registration. On the conclusion recorded by the Tribunal that the partnership deed dated April 1, 1950 was in truth an ins- trument relating to an agreement to carry on business 'by all the persons who owned the five businesses of which the representatives signed the deed, the application submitted by the live named partners of the assessee did not conform to the requirements of rules 2 and 3 and the Income-tax Officer was bound to refuse registration. It is true that the ,ground given by the Tribunal that the share of profits received by individual partners of the assessee was distributed by four of those partners who had entered into partnership contracts with other persons in the business of their respective match factories, standing independently of other grounds, may not be of much value in deciding whether all the partners of the match factories were intended to be partners of the assessee. It is open to a partner who receives his share in the profits of the firm to dispose of that share in any manner he pleases, and no inference from the distribution of the share of such profits alone can lead to the ,inference that the persons who ultimately received the benefit of the profits are partners of the firm which had distributed the profits. But the Tribunal adverted to three circumstances. The terms of the deed of partnership purported to impose an obligation to pay Commission on the production of the five match factories, representatives of which sought to join as partners eo nomine. Imposition of such ,an obligation was in the view of the Tribunal inconsistent -with the representatives of those factories being partners of the assessee in their individual capacities. Again it was 51 S. C.-3 found that Gnanam Match Works had contributed capital to the assessee directly and not through its representative. These wo circumstances, coupled with the ultimate distribution of profits by the individual partners among the partners of the match factories, led to the inference that each partner who signed the deed dated April 1, 1950 was acting not in his personal capacity, but as representing his match factory. Granting that the evidence from which the inference was drawn was not very cogent, it was still exclusively within the province of the Tribunal to decide that question on the evidence before it, and its decision that in entering into the deed of partnership, the named partners represented their respective match factories, was not open to be canvas- sed in a reference under s. 66(2) of the Indian Income-tax Act. The High Court observed that cl. 16 of the partnership deed did no, impose any obligation upon the partners or their representatives of the five firms to pay commission as stipulated under that clause. Undoubtedly, there is no covenant expressly imposing such liability upon the mach factories, but it was open to the Tribunal from he incor- poration of such an unusual covenant to infer that the named partners of the assessee were acting as representatives of their respective factories. To assume from the erms of cl. 16 that the owners of these match factories were not bound by the covenants contained in cl. 16 is to assume the answer to the question posed for opinion. There was also the circumstance that in the books of account of the Gnanam Match Works of which Palaniswamy Nadar was a representative, capital was debited as contributed to the assessee. This indicated that the Gnanam Match Works was directly interested in the partnership. If that factory had made an advance to Palaniswamy Nadar to enable the latter to contribute his share of the capital, the entry in the factory's books of account would have been in the name of its partner and not in the name of the assessee. That also is a circumstance justifying an inference that in entering into the deed dated April 1, 1950 Palaniswamy acted for and on behalf of all the partners of the Gnanam Match Works. Sharing of profits received by the named partners, with their partners in the respective match factories may not, as I have already observed, by itself be a decisive circumstance. But that did not authorise the High Court to disregard the find- ing of the Tribunal on a question which was essentially one of fact. When the High Court observed that they were satisfied that the Tribunal had not correctly appreciated the evidence in arriving at the conclusion that each Match factory was the real party in the instrument of partnership, they assumed to themselves jurisdiction which they did not possess.