1. The question which has been referred to this court under s. 256(1) of the I.T. Act, 1961 (hereinafter referred to as "the Act"), is as follow :
"Whether, on the facts and in the circumstance of the case, and on the correct interpretation of the partnership deed dated March 17, 1961, the Tribunal was right in refusing registration to the assessee-firm ?"
2. One Gokaldas Mulchand and his son, Harkisondas Gokaldas, were partners of the assessee-firm. With effect from November 1, 1959, another son of Gokaldas, namely, Anilkant gokaldas, was taken as a partner of the assessee-firm. On the clauses of the partnership deed provided that on the death of any of to the partners "the said partnership shall not and shall not be deemed to have been dissolved as from the date of death of the said partners" and shall be deemed to continue as before taking the heirs and legal representatives of the deceased partners as partners in his place.
3. Harkisondas Gokaldas, a partner of the firm, died on or about February 8, 1961, leaving behind him his, wife, Smt. Taramati, a major daughter named, Kanchan, two minor sons, Kishorechandra and Rameschandra and two minor daughters, Tarulata and Karuna. A fresh partnership deed was executed by an between Gokaldas Mulchand, Anilkant Gokaldas, Taramati and Kanchan on March 17, 1961. In the preamble to the partnership deed the party of the third part was described as Taramati, widow of Harkisondas Gokaldas, and Kanchan, Kishorechandrta, Tarulata, Rameshchandra and Karuna, all children of Harkisondas Gokaldas, since deceased, "the last four minors by their mother and natural guardian, Taramati and all six persons as the heirs and legal representatives of the said Harkisondas Gokaldas, since deceased", The relevant clauses dealing with the shares of the partners was cl. 4, which read as follow :
"After defraying rents, wages, taxes, interest and all other incidental expenses and outgoing pertaining to the partnership business the net profits in the partnership shall be divided between the partner as follow :
Party of the first part Gokaldas Mulchand Rs. 0-6-0
Party of the second part Anilkant Gokaldas Rs. 0-4-0
Party of the third part Taramati w/o Harkisondas Kanchan Harkisondas, Kishorechandra Harkisondas aged 12 years Tarulata Harkisondas, Rs. 0-6-0 aged 10 years Rameshchandra Harkisondas, aged 6 years Karuna Harkisondas, aged 1 year
If there be any loss in the said partnership business, the same shall be borne by the parties of the first, second, and third parts in proportion to their shares, but as regards the party of the third parts, Kishorechandra, Tarulata, Rameshchandra and Karuna who are all minors, who are admitted to the benefits of the partnership only, shall not be liable to bear and pay any losses and the major partners of the party of the third part only shall have to bear and pay the said loss coming to the share of the said party of the third part."
4. The partnership deed was signed by Gokaldas Mulchand and his son, Anilkant Gokaldas, as well as by Taramati, widow of Harkisondas Gokaldas, and Kanchan, the major daughter of Harkisondas. Thus, according to the terms of the partnership deed, Gokaldas, Anilkant, Taramati and Kanchan were full-fledged partners and the four minor children of Harkisondas were admitted to the benefits of the partnership. The share in the profit as shown in the partnership was with reference to the party of the third part, namely, six legal representatives of the deceased Harkisondas, the share being six annas. With regard to the losses which would come to the share of the party of the third part, that is, all the six legal representatives of the deceased Harkisondas, the agreement was that the loss coming to the share of the heirs of Harkisondas will have to be born by Taramati and Kanchan.
5. The ITO while considering the application from for registration took the view that in the absence of any provisions in the partnership deed relating to individual specifications of shares of all the partners the registration could not be granted. According to him the individual shares of the window and the major daughter as well as the shares of the four minor children, who were admitted to the benefits of the partnership, were not specified in the partnership deed. The AAC also came to the conclusion that, as the individual shares of the partners were not specified and, further, having regard to the fact that the profits coming to the share of the party of the third part were credited into one accounts, the order refusing registration was proper.
6. In the assessee's appeal to the Tribunal, it was contended that the shares of the heirs would be determined according to the provisions of the Hindu Succession Act, 1956. The Tribunal took the view that the firm was not entitled to registration as it found that the fact that the shares of the six-persons inter se should be determined as provided in the Hindu Succession Act, as contended on behalf of the assessee, was not even stated in the partnership deed. The Tribunal also observed that there was not other material on which it could be ascertained as to what were the shares of the legal heirs of Harkisondas. The Tribunal thus having upheld the action of the ITO in refusing registration, the question reproduced earlier which arose out of the order of the Tribunal has been referred to this court at the instance of the assessee.
7. Mr. Dwarkadas appearing on behalf of the assessee could not dispute the fact that the partnership deed does not expressly specify the shares of each of the six heirs of Harkisondas and that partnership deed only cumulatively showed that the six heirs of Harkisondas had together six annas shares. What is, however, contended before, us is that it will be apparent on the proper application of the principal of the Hindu Succession Act, 1956, that the partly of the third part consisting of six heirs of Harkisondas had succeeded to the same share, which a Harkisondas had in the partnership firm when he was alive, therefore, Harkisondas having left six heirs, that is, his widow, Taramati and five children, each one of them would take equally, with the result, according to learned counsel, that each of the six heirs of Harkisondas would have one anna share in the profits of the partnership firm.
8. Another limb of the same argument advanced by learned counsel for the assessee-firm was that reference to the provisions of s. 13(b) of the Partnership Act would show that each one of the six person, who was described as party of the third part, would have an equal share in the profit of the partnership.
9. Mr. Joshi appearing on behalf of the revenue has, however, contended that the question as the whether the partnership firm is entitled to registration must be determined by the provisions of ss. 184 and 185 of the Act read with rr. 22 to 25 of the I.T. Rules. According to learned counsel, reference to the provisions of the Hind Succession Act cannot be brought in order to determine the shares of the partners because the share of the partners interest was a matter of internal arrangement between them and it could not be assumed for the purpose of the provisions of ss. 184 and 185 of the Act that the shares of the several heirs in the profits of the partnership firm would necessarily be the same as provided in the Hindu Succession Act. The question as to whether the shares of the different partners can be ascertained must, according to learned counsel, be determined on the terms of the instrument of partnership alone.
10. Section 184 of the Act provides for an application for registration of a firm for the purposes of the Act if, (i) the partnership is evidence by an instrument; and (ii) the individual shares of the partners are specified in that instrument. Sub-section (5) of s. 184 requires the original instrument evidencing the partnership to be produced along with the application. Under r. 22 of the I.T. Rules an application for registration has to be made in Form No. 11. One of the points in respect of which information is required to be furnished in the application is "share in the balance of profit (or loss) percentage". The procedure which is to be followed on receipt of an application for registration made under s. 184 is provided for in s.
185. Under that section if the ITO is satisfied about the existence of a genuine firm during the previous year, he shall make an order in writing registering the firm for the assessment year, and if he is not so satisfied he can refuse registration. It may be pointed out at this stage that under cl. (23) of s. 2 of the Act partner includes a minor, who is admitted to the benefits of partnership. Clause (23) of s. 2 of the Act read :
"'Firm', 'partner' and 'partnership' have the meaning respectively assigned to them in the Indian Partnership Act, 1932 (IX of 1932) but the expression 'partner' shall also include any person who, being a minor, has been admitted to the benefits of partnership."
11. Reading s. 184(1)(ii) with the definition of "partner", it is obvious that s. 184 requires that the instrument of partnership should not only specify the share of the individual partners but that such share must also be specified in respect of the minors who were admitted to the benefits of the partnership. It this is the requirement of law, before a firm can claim registration under s. 185 it must satisfy the said requirement. Unless the statutory requirements are satisfied and the basic requirements being that the partnership is evidenced by an instrument and the individual shares, of the partners are specified in that instrument, no valid claim for registration of the partnership could be made by the firm.
12. Though the provisions of s. 184 of the Act have made certain changing as compared with the provisions of s. 26A of the Indian I.T. Act, 1922, the substantial requirements that there must be an instrument of partnership and the individual shares of the partners must be specified in the said instrument of partnership remain the same. The requirements of s. 26A of the Indian I.T. Act, 1922, have been considered in a large number of cases by the Supreme Court. In Rao Bahadur Ravulu Subba Rao v. CIT . Referring to the
provisions of s. 26A of the Indian I.T. Act, 1922, the Supreme Court pointed out that the right to apply for registration of a firm under s. 26A is to be determined exclusively by reference to the preference to the prescription laid down therein. The Supreme Court has pointed out that the India I.T. Act is a self-contained code exhaustive of the matters dealt with therein and its provisions show an intention to depart from the common rule. Its intention again is that a firm should be given the benefit of s. 23(5)(a) only if it is registered under s. 26A in accordance with the conditions laid down in that section and the rules framed thereunder. In R.C. Mitter & Sons v. CIT  36 ITR 194, the Supreme Court observed that the following conditions (p. 198) must be fulfilled in order that a firm may be entitled to registration under s. 26A of the Indian I.T. Act (headnote :
(i) the firm should be constitute under an instrument of partnership specifying the individual shares of the partners;
(ii) an application on behalf of, and signed by, all the partners, and containing all the particular as set our in the Rules, must be mad :
(iii) the application should be made before the assessment of the income of the firm, under section 23, for that particular yea :
(iv) the profits or losses, if any, of the business relating to the accounting year should have been divided or credited, as the case may be in accordance with the terms of the instrumen : and
(v) the partnership must be genuine and must actually have existed in conformity with the terms and conditions of the instrument of partnership, in the accounting year.
13. In N.T. Patel & Co. v. CIT  42 ITR 224, the Supreme Court observed as follows (p. 228 :
"Registration under section 26A of the Act confers a benefit on the partners which the partners would not be entitled to but for section 26A. The right can be claimed only in accordance with the stature which confers it and a person seeking relief under that section mast bring himself strictly within the terms of that section."
14. It is, therefore, clear from these decision of the Supreme court as well as the provisions of ss. 184 and 185, that, unless the requirements of those sections are complied with, and one of the requirements of s. 184 instrument of partnership, a partnership firm will not be entitled to registration, if that requirement is not satisfied.
15. It is in this context that he learned counsel for the assessee has argued that even though a specific share of each of the partners, who were the heirs of the deceased, Harkisondas, was not specified in the a partnership deed, we must attempt to find out the share by application of the provisions of the Hindu Succession Act. Learned counsel had contended on the authority of a decision of the Calcutta High Court in CIT v. R. S. Singh & Co.  118 ITR 30, that an attempt must be made to save the deed, and if there is any ambiguity in the document, the intention of the parties must be ascertained. In R.S. Singh & Co.'s, case, the question was whether on the terms of the documents of partnership of the parties could be said to have intended to make an HUF a partner. While dealing with that contention the Division Bench of the Calcutta High Court observed that the law anxious to save a deed if possible and in ascertaining the legal effect of a transaction the court seeks to determine in the first instance the intention of the parties and when ambiguous expressions are used, the court may normally adopt that interpretation which upholds the deed, if the parties thereto have acted on the assumption of its validity. It is no doubt true that the court upheld the document as one of partnership in which the karta of the HUF was treated as a partners in his individual capacity, and consequently the firm was also entitled to a reveal of registration.
16. Mr. Dwarkadas on behalf of the assessee was not in a position to dispute that taking the document as it is there was nothing in the partnership deed which indicated as to how the six annas share of profits which jointly fell to the share of the party of the third part consisting inter se between them Now, a partnership is a result of an agreement between the partners. Though the deed of partnership refers to all the six heirs of Harkisondas as party of the third part, strictly speaking, there are four partners, namely, Gokaldas, Anilkant, Taramati and Kanchan, and there are four minors, who were a admitted to the benefit of the partnership. There is no difficulty about ascertaining the shares of Gokaldas and Anilkant, because their, shares, have been expressly referred to in the partnership deed concerned, out of whom two are partners and four others are admitted to the benefit of the partnership, it is impossible to ascertain, on the terms of the documents of partnership, the shares of each of these six legal heirs of Harkisondas. As already pointed out, s. 184(1)(ii) requires the individual shares to be specified in the instrument of partnership. In other words, such shares must be ascertainable on the terms of the documents itself, and if on the terms of the documents the share is not ascertainable the deed of partnership will not meet the requirements of s. 184(1)(ii).
17. There can be no difficulty in accepting the submission that under the provisions, of the Hindu Succession Act, 1956, each one of the heirs of the deceased, Harkisondas, was entitled to one-sixth share in the entire estate of Harkisondas, But when we say that each heir will be entitled to one-sixth share in the estate of Harkisondas, that is not the same thing as saying that the partners inter se have agreed between themselves to share the profits in the same proportion, and no such presumption can be drawn for the purposes of the statutory provisions of s. 184(1)(ii) which requires that the individual share of the partners should be specified in the instrument of partnership.
18. It is no doubt true that in Parekh Wadilal Jivanbhai v. CIT , the shares of the individual partners came to be
determined by reading the partnership deed as a whole and in the context of the relevant circumstance of that case. No such circumstances as were found in that case are available on the fact found in this case. In Parekh Wadilal Jivanbhai's case, there were three partners in the assessee-firm, each one having one-their share in the partnership firm which was constituted under a deed of partnership dated March 19, 1950. Prior to November, 1949, these three partners of the assessee-firm were in partnership with eight other persons, carrying on business in Bombay and other places in the name and style of "Rajnikant Vithaldas & Co. " The three partners of the assessee-firm had each two annas share in the firm, Rajnikant Vithaldas & Co. and the other eight partners had the remaining ten annas shares. The bigger partnership was dissolved on October 31, 1949, and on dissolution of this bigger firm the business of the two branches of the bigger firm at Nagpur was allotted to the three partners who constituted a partnership as from November 1, 1949, though the deed of partnership was executed from March 19, 1950. The capital of the new partnership of the three partners was to be Rs. 2,40,000, divided into 15 shares of Rs. 16,000, each, and each partner had agreed that the shares allotted to different partners will be equal, that is, each partners will get five shares. The relevant clause which fell for consideration was as follow : (p. 486 :
"After meeting all expenses, interest and other charges, the resulting net profit or loss shall be ascertained and shall be divided amount all partners."
19. The ITO had granted registration for the assessment year 1951-52 and the total income of the firm was allocated between three partners, each getting one-third share. The registration was renewed for the assessment year 1952-53, but when a fresh application for registration was made for the assessment year 1953-54, that was rejected on the ground that the partnership deed had not specified the individual share of each partner. This order having been confirmed by the AAC and further by the Appellate Tribunal, the matter came to this court by way of a reference, and the reference was answered against the assessee. Before the Supreme Court in appeal by the assessee it was argued that on a proper construction of the various clauses of the partnership deed dated 19-3-1950, the shares of the individual persons in the profits and losses should have been held to have been clearly specified, namely, each partners was allowed an equal one third share. This argument was accepted by the Supreme Court, and while accepting the argument two circumstances made by the assessee-firm under s. 26A of the Indian I.T. Act, 1922, the three partners have been the books of account for all the years since its commencement from 1-11-1949 right up to date, the profit have been apportioned equally among the three partners of the partnership-firm. It was in this context that the Supreme Court observed as follow (p. 48 :
"Reading the partnership deed as a whole and in the context of the relevant circumstances of the case, we are of the opinion that there was specification of the individual shares of the partners in the profits within the meanining of section 26A of the Act and the assessee-firm was entitled to registration for the assessment year in question."
Thus, on the facts, it was held that each one of the partners had a one third share.
20. As already pointed out, in so far as the present case is concerned, there is no indication whatsoever in the partnership did not are there any attendant circumstances which would indicate as to in what manner it was agreed between the partners as to how the six annas share of profits going to the share of the Harkisondas was to be shared by his heirs out of whom two were full-fledged partners and the other four were minors admitted to the benefits of the partnership. It is not possible to spell out any agreement with regard to the share in profits of each of the heirs from the deed of a partnership. The partnership deed is in law the product of an agreement between all the partners, and in this case Taramati and Kanchan can alone be treated as being partner to the agreement of partnership. Strictly speaking, to what extent the minors would also share, in the profits of the partnership would be a matter on which all the partners were expected to agree if a valid agreement of partnership was to come into being. Though by virtue of the fact that party of the third part consisted of heirs of Harkisondas and between themselves it would be a matter of internal arrangement, firstly, the nature of the internal arrangement cannot be speculated upon, and, secondly, there is nothing in the document nor is there any circumstance to show that there was any agreement to which all the partners were parties, Reference to the provisions of the Hindu Succession Act would, therefore, not be appropriate for determining the individual shares of the party of the third part.
21. An argument was advanced on the basis of s. 13 of the Partnership Act, and according to learned counsel for the assessee, in view of cl. (b) of s. 13 it would be reasonable to assume that the six persons who constituted the party of the third part between themselves would shares equally the six annas share of profits. The relevant part of s. 13(b) reads as follow :
"13. Subject to contract between the partners-(a)....
(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm."
22. On a bare reading of the provisions of s. 13(b), it is apparent that it deals with the manner in which the profits of the firm are to be shared as a whole. They are to be shared equally by the all the partners subject to a contract between them, or, in other words, if there is nothing to show that there is an agreement between the partners in respect of their respective shares in the profits or losses, such profits and losses, shall be shared by all the partners equally. Section 13(b) will not be attracted to a case where the share of two or three partners is cumulatively shown in the deed of partnership. Since s. 13(b) can apply only where a question arises in respect of the entire profits or losses of the firm as a whole, those provisions will not be of any assistance to the assessee in support of his contention that the different members of the third part will also entitled to share the profits equally. The decision of the Madras, Patna, Calcutta where the shares are shown cumulatively, there is no compliance with the provisions relating to the registration of the partnership deed, and the ITO will be justified in refusing registration. It is not necessary for us to refer in detail to those decisions.
23. The law has been exhaustively considered in the decision of the Andhra Pradesh High Court in Khummaji Milapchand & Co. v. CIT  91 ITR 333. In that case one of the for partners of the assessee-firm died and his three minor sons were admitted to the benefits of the partnership. The amount standing to the credit of the deceased partner in the account books of the previous firm was treated as capital of the three minor sons in the deed of partnership. The three minor sons were allocated shares collectively being 0.23 np. The ITO had granted registration, but the Commissioner had cancelled the registration granted to the assessee-firm. The Income-tax Appellate Tribunal confirmed the order of the Commissioner on the ground that the individual shares of the three minors and the profits of the business were not specified. When the matter came to the Andhra Pradesh High Court, that court took the view that in both the instrument of partnership the three court took the view that in both the who were admitted to the benefits of the partnership were shown as one requirement of law that the individual shares of the partners should be specified in the deed of partnership was not fulfilled. Therefore, the assessee-firms were held not entitled to the grant of registration. The Andhra Pradesh High Court also held that there was no specification of the shares of the other individual partners in losses in the instrument of partnership which was also fatal to the grant of registration. The question relating to the absence of specification of the shares in losses we shall consider later, but at this stage it may be pointed out that in the partnership involved in the Andhra Pradesh decision the partners had unequal shares. Two of the partners had a share equal to the 0.23 np. each, two other partners had a share-capital equal to 0.17 np. and 0.14 np. respectively, and the share of the minors admitted to the benefits of the partnership was shown to be 0.23 np. the Andhra Pradesh High Court observed that though the three minors were admitted to the benefits of the partnership, because they were the male heirs of the deceased, it did not mean that the collective share which was allotted to the minors was taken by them in equal shares, and how they would divide their shares would be a matter of internal arrangement between them. It was found that there was nothing in the instrument of partnership which established that there was an internal arrangement between the minors to shares in equal proportion the profits allotted to them for their collective share. It was then observed (pp. 341-42 :
"From the mere fact that the minors were entitled in equal proportion to the capital of their father does not in our opinion give rise to an inference that they would also share the profits in equal proportion."
24. The learned judges of the Andhra Pradesh High Court referred to the decision of the Madras, Patna, Calcutta and Gujarat High Courts in support of the view taken by them.
25. In. CIT v. N. V. Abdulla Sahib  10 ITR 7, a Full Bench of the Madras High Court took the view that where on the death of one of the partners a firm was reconstituted by taking in his place the widow of the deceased as a partners and six minor children were admitted to the benefits of the partnership and in the instrument of partnership all the six minor children were shown as "a body" jointly entitled to a four annas share, and further nothing was said about the admission of minors to the benefits of the partnership, but instead it was stated in the application for registration, "the individual shares of the minors who were admitted to the benefits of the partnership could not be said to have been specified in the instrument of partnership and refusal of registration was justified."
26. In Khimji Walji & Co. v. CIT  25 ITR 462 (Pat), where the shares of the minors, who were admitted to the benefits of the partnerships shares of the minors, who were admitted to the benefits of the partnership in place of their deceased father, were shown collectively as "10 annas", the Patna High Court held that the refusal of registration was justified on the ground that "the shares of the individual partners were not specified in the instrument of partnership". The decision of the Calcutta and Gujarat High Courts, which took a similar view, are Karnidan Rawatmull v. CIT  48 ITR 922 (Cal) and CIT v. Shivlal Dayaram Panchal  62 ITR 298 (Guj) respectively.
27. We may also refer to a later decision of the Calcutta High Court, which has followed the decision of the Andhra Pradesh High Court in Khummaji Milapchand's case  91 ITR 333 in Premsukh Ganeshmull v. CIT , where one of the partners of the assessee-firm died and in his place his four minor children were admitted to the benefits of the partnership represented by their mother. The minors were given collectively one-tenth share in the profits, and all the four minor children were collectively described as partner No. 7. The contention advanced before the Calcutta High Court was similar to the one advanced before us, namely, having regard to the provisions of s. 13(b) of the Partnership Act the shares of the minor children must be taken to be equal. Holding that the minors, when they are admitted to the benefits of the partnership, are not partners in the firm, the Calcutta High Court pointed out that s. 13(b) of the Partners Act has no application in such a case. Reference was also made to s. 30(2) under which where a minor is admitted to the benefits of the partnership he is entitled to receive "the profits of the firm as may be agreed upon", and it was pointed out that the minors having been given a collective share, to hold that they have equal shares in their collective shares is to make a new contract for the parties, which the court is wholly incompetent to do.
28. When it was contended before the Calcutta High Court that the minors had equal shares in their collective share, for, the principle of Hindu law is that where a gift or bequest is made to two persons they will take the property in equal shares as held by the Calcutta High Court in the case of CIT v. Pulin Behari Dey  20 ITR 314, the Calcutta High Court rejected this contention on the ground that in the case of the joint property of an undivided Hindu family governed by the Mitakshara law the principle of joint tenancy was unknown to Hindu law except in the case of coparcenary between the members of an undivided family, as observed by the Privy Council in Jogeswar Narain Deo v. Ram Chandra Dull  ILR 23 Cal 670, 679. The High Court also referred to the observations of the Supreme Court in Rao Bahadur Ravulu Subba Rao v. CIT  30 ITR 163 in which, dealing with the provisions of s. 26A of the Indian I.T. Act, 1922, the Supreme Court had held that "the statute must be construed as exhaustive in regard to the conditions under which it (registration) can be claimed". The Calcutta High Court pointed out that these observations set at rest the argument folded upon the Mitakshara School of Hindu law and then quoted the following passage from Karnidan Rawatmull v. CIT  48 ITR 922 (p. 1009 of 106 ITR :
"It is not open to the income-tax authorities to go into question of Hindu law and then firm out by reference to the deed of partnership as to what the individual shares of the partners should be. Whatever be the reason, the legislature has not provided for that and the parties must suffer if there has been no compliance with the Act."
29. Learned counsel for the assessee has sought to distinguish the decision in Premsukh's case ) on the ground that
although in deceased partners had left behind a window was not made a partners in the firm, and only minors were admitted to the benefits of the partnership. This circumstance does not in our view make any difference to the ratio of the decision in Premsukh's case. The propositions of law that down in the Calcutta decision were not based on any particular facts but were general propositions based on the interpretation of s. 26A of the Indian I.T. Act, 1922, is sufficiently complied with if only the shares of partners in profits of the firm are indicated in the deed of partnership. In Parekh's case the Division Bench has taken the view that it is enough if only the shares in profits are indicated in the deed of partnership, and for the purposes of granting relief to the partners there was no need to make any specific agreement relating to the losses, which is a contigency in a business adventure. An appeal was taken to the Supreme Court against the decision of this court in Parekh's case  42 ITR 266, and it does not appear that the view in Parekh's case that it would be sufficient if the shares in the profits were indicated in the deed of partnership was subjected to any further scrutiny.
30. Learned counsel for the assessee, therefore, contends that having regard to the decision of the Division Bench in Imdadalis case, non-specification of the shares in the losses cannot be a ground for refusing registration. Now, there is no doubt that a view was taken in Imadadali's case that it was not necessary to specify the shares in the losses. It is also true that cl. (ii) of s. 184(1) of the Act does not in terms refers to a specification of the shares of loss. The question, however, as to whether an instrument of partnership for the purposes of s. 184 must specify the shares of the losses does not appear to be now open to dispute because of two decisions of the Supreme Court. In N.T. Patel & Co. v. CIT  42 ITR 224, at p. 228, the Supreme Court had observed that the specification of the shares of the partners in the profits and losses of the firm was requisite for registration of the partnership under s. 26A of the Indian I.T. Act, 1922, and if that is wanting, registration can be refused. The matter seems to have fallen for express consideration by the Supreme Court in Mandyala Govindu & Co. v. CIT  102 ITR 1. In that case, the partnership firm consisted of three partners whose shares in the profits were 31% 23% and 22% respectively, and a minor was admitted to the benefits of partnership with a shares of 23% in the profits. There was no clauses in the deed specifying the proportion in which the three adult partners were to share the losses. One of the clauses provided that the partners are bound to act according to the stipulation in the deed and according to the provisions of the partnership Act. It was argued before the Supreme Court that it was sufficient if the proportion in which the losses were to be shares was otherwise ascertainable and that cl. 9. which required that the partners were bound to act according to the stipulation in the deed and according to the provision of the Partnership Act, specified the requirement as it brought in by implication s. 13(b) of the partnership Act. The Supreme Court noted the conflict of opinion in different High Courts on the question as to whether the shares of the partners in the losses must be specified in the partnership deed. While the Mysore High court in R. Sannappa and sons v. CIT  66 ITR 27 and the Allahabad High Court in Hiralal Jagannath Prasad v. CIT  66 ITR 293, took the view that it was not necessary to specify the shares in the losses in the partnership deed, a contrary view relied upon on behalf of the revenue was taken by the Gujarat High Court in Thacker & Co. v. CIT  66 ITR 540. The view of the Gujarat High court was followed by the Kerala High Court in two decisions in C.T. Palu & Sons v. CIT  22 ITR 641 and CIT v. Ithappiri & George  88 ITR 332. While making the observation that for the purposes of the appeal before them it would not be necessary for the Supreme Court to consider at any length the conflicting views of the different High Courts and decide which view is correct, because on the facts of the case the appeal filed by the assessee was bound to fail on any view, the Supreme Court made the following significant observations (p. 5 :
"It is not, and it cannot be, disputed that the Income-tax Officer before allowing the application for registration must be in a positions to ascertain the shares of the partners in the losses even if section 26A did not require the shares in the losses to be specified in the instrument of partnership..... In the case before us the partners having unequal shares in the profits, there can be no presumption that the losses are to be equally shared between them."
31. The Supreme Court rejected the argument that the share in the losses should be determined having regard to the provisions of s. 13(b), and then went on to consider the argument that where the shares in the profits are unequal, the losses must be shared in the same proportion as the profits if there is no agreement as to how the losses are to be apportioned. This argument was also held not to be applicable to the case before the Supreme Court and was rejected with the following observation (p. 7 :
"In this case even if the adult partners bear the losses in proportion to their respective shares in the profits, the amount of loss in the minor's share would still remain undistributed. Will the partners between them bear this loss equally, or to the extent of their own individual shares ? To this the instrument of partnership does not even suggest an answer. There is, therefore, no means of ascertaining in this case how the losses are to be apportioned."
32. This decision clearly points out that the absence of specification of the shares in which the losses will be apportioned by the partners is an important consideration for determining whether a partnership satisfies the requirement for registration under s. 184 of the Act or not. In the case before, us also, in what proportion Taramati and Kanchan will share the losses is not clear from the document itself. The is an additional ground on which the registration could validly be refused to the firm. In view of the decision of the Supreme Court referred to above, there is a clear infirmity in the view which the Division Bench has taken in Imadadali's case.
33. In the view which we have taken, the question referred to us must be answered in the affirmative and against the assessee. Assessee to pay costs to the revenue.