Greenfields, Patna v. Commissioner Of Income-Tax B. And O. Opposite Party.

Ramaswami, C.J:— In this case the assessee is a partnership firm consisting of eight partners. It started business on 23-6-1948, and closed its accounts for the first time on 31-5-1949. The assessee applied for registration of the firm under Section 26A of the Indian Income-tax Act on the 14th April, 1951. The Income-tax Officer granted registration of the firm on 29-9-1954. On 16-11-1954, the assessee applied for the renewal of the registration in respect of the assessment years 1951–1952, 1952–1953, 1953–1954 and 1954–1955. With regard to the assessment year 1–951-52 the application for renewal of registration was rejected by the Income-tax Officer on the ground that it was much belated. The Income-tax Officer also noticed another serious defect in the application for renewal.

2. The application was signed by seven partners and by the Mukhtaram of Bahuria Jasopat Kuer, who was a partner of the firm. Bahuria Jasopat Kuer died on the 20th March, 1958, and the application for renewal of the registration was signed by Radha Prasad Sinha as her Mukhtaram. An appeal was taken by the assessee to the Appellate Assistant Commissioner from the order of the Income-tax Officer. The appeal was rejected by the Appellate Assistant Commissioner on the ground that the application for renewal should have been filed on or before the 28th February, 1953, or at the latest before May, 1953, to which date the period for filing application was extended by an executive order and that the Income-tax Officer was justified in not condoning the delay. The Appellate Assistant Commissioner also found that in paragraph 2 of the application for renewal of registration the partners certified that the constitution of the firm and the individual shares of the partners as specified in the instrument of partnership which was registered on 29-9-1954, “remained unaltered”. The Appellate Assistant Commissioner took the view that the certificate was wrong since the constitution of the firm and the shares of the partners had been altered with effect from the 20th March, 1952, consequent upon the death of Bahuria Jasopat Kuer. An appeal was again taken by the assessee before the Appellate Tribunal. The appeal was dismissed by the Appellate Tribunal on the ground that there was undue delay in filing the application for renewal of registration and there was no compliance with the provisions of Rule 6 as Radha Prasad Sinha had signed the application as the power agent of Bahuria Jesopat Kuer. The Appellate Tribunal also held that the certificate by the partners with regard to the constitution of the firm and the shares of the partners was wrong.

3. At the instance of the assessee the Income-tax Appellate Tribunal has submitted the following questions of law for the opinion of the High Court under Section 66(1) of the Income-tax Act:

“1. Whether on the facts and circumstances of the case the rejection of the application for renewal of registration filed on 16-11-1954 under Section 26A of the Indian Income-tax Act read with the amended rules 2 to 6 made thereunder was in accordance with the law?

2. Whether on the facts and circumstances of the case the application for renewal of registration was in conformity with rule 6 of the Income-tax Rules?”

4. After hearing the parties in the case, I think the two questions should be reframed and ??? into one question as follows in order to bring out the real controversy between the parties:

“Whether in the facts and circumstances of the case, the application for renewal of registration for the assessment year 1952–1953 should have been granted by the Income-tax authorities?”

5. It is necessary at this stage to reproduce the statutory rules with regard to renewal of registration of firms under Section 26A of the Income-tax Act. The relevant rules are rules 2 and 6 which were amended by a notification of the Cental Board of Revenue under Section 59 of the Income-tax Act, dated 20-11-1952. These rules as they stood before the amendment are as follows:

“2. Any firm constituted under an Instrument of Partnership specifying the individual shares of the partners may, under the provisions of Section 26A of the Indian Income-tax Act, 1922 (hereinafter in these rules referred to as the Act), register with the Income-tax Officer, the particulars contained in the said Instrument on application made in this behalf.

Such application shall be signed by all the partners (not being minors) personally and shall be made

(a) before the income of the firm is assessed for any year under S. 23 of the Act, or,

(b) if no part of the income of the firm has been assessed for any year under S. 23 of the Act, before the income of the firm is assessed under S. 34 of the Act, or

(c) with the permission of the Appellate Assistant Commissioner hearing an appeal under S. 30 of the Act before the assessment is confirmed, reduced, enhanced or annulled, or

(d) if the Appellate Assistant Commissioner sets aside the assessment and directs the Income-tax Officer to make a fresh assessment, before such fresh assessment is made, or

(e) before or after the dissolution of the firm in respect of the assessment or assessments to be made on its income up to the date of dissolution:

Provided that where an application is made under clause (a) after dissolution of the firm, it shall be signed by all persons who were partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased.”

“6. Any firm to whom a certificate of registration has been granted under rule 4 may apply to the Income-tax Officer to have the certificate of registration renewed for a subsequent year. Such application shall be signed personally by all the partners (not being minors of the firm or where the application is made after dissolution of the firm by all persons not being minors), who were partners in the firm immediately before dissolution and by the legal representative of any such persons who were partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased, and accompanied by a certificate in the form set out below. The application shall be made within the time and subject to the conditions, if any, which are specified in clause (a), clause (b), clause (c), clause (d) or clause (e) as the case may be of rule 2.”

6. The notification of the Central Board of Revenue No. S.R.O 1953, dated 20-11-1952, is in the following terms:

“In exercise of the powers conferred by sub-section (1) of Section 59 of the Indian Income-tax Act, 1922 (XI of 1922), the Centra Board of Revenue hereby directs that; the following further amendments shall be made in the Indian Income-tax Rules, 1922, the same having been previously published as required by sub-sec. (4) of the said section namely:

In the said Rules—

1. In rule 2, for the second and third paragraphs the following shall be substituted, namely:

‘Such application shall be signed by all the partners (not being minors) personally, or in the case of dissolved firm by all persons (not being minors) who were partners in the firm immediately before dissolution and by the legal representative of any such partner who is deceased, and shall, for any year of assessment up to and including the assessment for the year ending on the 31st day of March, 1953, be made before the 20th February, 1953, and for any year of assessment subsequent thereto, be made—

(a) where the firm is not registered under the Indian Partnership Act, 1932 (IX of 1932) or where the deed of partnership is not registered under the Indian Registration Act, 1908 (XVI of 1908), and the application for registration is being made for the first time under the Act.

(i) within a period of six months of the constitution of the firm or before the end of the ‘previous year’ of the firm whichever is earlier, if the firm was constituted in that previous year.

(ii) before the end of the previous year in any other case,

(b) where the firm is registered under the Indian Partnership Act, 1932 (IX of 1932) or where the deed of partnership is registered under the Indian Registration Act, 1908 (XVI of 1908), before the end of the previous year of the firm, and

(c) where the application is for renewal of registration under rule 6 for any year, before the 30th day of June, of that year:

Provided that the Income-tax Officer may entertain an application made after the expiry of the time-limit specified in this rule, if he is satisfied that the firm was prevented by sufficient cause from making the application within the specified time.

3. In rule 6, for the words beginning with the words ‘the application shall be made’ and ending with the words and figure ‘rule 2’ the following shall be substituted, namely:

‘The application shall be made before the 30th day of June of the year for which assessment is to be made provided that the Income-tax Officer may entertain an application made after the expiry of the said date, if he is satisfied that the firm was prevented by sufficient cause from making the application before that date’”.

7. On behalf of the assessee Mr. S.N Dutta put forward the argument that the application for registration of a firm or for renewal of such registration under S. 26-A is a statutory right and the provisions of the new rules 2 and 6 take away such statutory right. It was submitted that the notification of the Central Board of Revenue for amending the rules was published on 20-11-1952, but according to the amendment the last date for filing application for renewal of registration for the assessment year 1952–1953 was the 30th of June 1952,

8. It was contended that in these circumstances the notification for amending the rules cannot be construed so as to take away the statutory right of the assessee and it must be held that the old rule 6 applies to the case of the assessee and the application made by the assessee for renewal of registration on 16-11-1954, was not barred by limitation. I do not accept the argument addressed on behalf of the assessee as correct. There was no difficulty or hardship in the way of the assessee in complying with the new rule. It is true that the new rule came into force with effect from 20-11-1952, but an executive instruction was given by the Central Board of Revenue to the Income-tax authorities to condone delay in applications up to the 28th of February, 1953, and the time was further extended up till May, 1953.

9. It is, therefore, clear that the period of about six months was available to the assessee for making the application for renewal of registration after the coming into force of the new rule. The question arises what is the correct rule of law with regard to retrospective operation of the amended rules 2 and 6 in these circumstances? It is necessary in this context to say that the application for registration of a firm under Section 26A of the Income-tax Act is not a general right but is a mere privilege given to a firm in order to enable individual partners to get the benefit of lower rates of assessment applicable wherever such rates are lower than the rate applicable to the total income of the partnership computed as a whole.

10. That was the contention put forward by the learned Standing Counsel of the Income-tax Department. In support of this proposition reference was made to the decision of this Court in Khimji Walji and Company v. Commissioner of Income-tax, B. and O., (1954) 25 ITR 462 : (AIR 1954 Pat 396). It was, however, argued on behalf of the assessee that the right of registration of a firm under S. 26A is a kind of vested right and it cannot be taken away retrospectively by an amendment of the statutory rule. I do not accept this argument as right in view of the decision of this Court in (1954) 25 ITR 462 : (AIR 1954 Pat 396), in which it was held that registration of firms under S. 26A is not a vested right but is a mere privilege given to a firm.

11. I shall, however, assume in favour of the assessee for the purpose of this case that registration of firms under S. 26A is some kind of vested right. Even upon that assumption I hold that the new rules 2 and 6 deal with the question of limitation and are, therefore, procedural in character and would have retrospective operation. It is a settled principle that such a procedural amendment operates from the date of its commencement and governs all applications for renewal of registration brought before the appropriate taxing authority after the date of its commencement. It is also a settled principle that there is no vested right in procedure and the rule of limitation cannot be considered as anything else than a matter relating to procedure and ordinarily such a rule has its operation from the date fixed for its commencement.

12. The principle has been explained in Khondkar Mahomed Saleh v. Chandra Kumar, ILR 56 Cal 1117 : (AIR 1930 Cal 34) in which the mortgaged property was sold on the 16th September, 1908, in pursuance of a decree of a minor mortgagee, the decree-holder purchasing it for Rs. 831/-. He attained majority on the 23rd September, 1923, and on the 23rd September, 1924, applied under O. 34, R. 6 of the CPC on the personal covenant contained in the deed, for a money decree for the balance together with interest. It was contended oil behalf of the defendant that the application was barred by limitation.

13. It was held by the High Court, reversing the decree of the Subordinate Judge, that the privilege of legal disability contained in S. 7 of Act XV of 1877, which entitled a person to make an application within the prescribed period after the disability had ceased, was not available to the mortgagee, since his application was governed by S. 6 of Act IX of 1908, and hence it should have been made within three years of the time when the right to apply accrued as per Article 181. A similar view has been expressed in Arayil Kaliamma v. Sankaran Nambudripad, ILR 34 Mad 292 and Ganapathy Mudaliar v. Krishnamachari, 70 Ind Cas 743 : AIR 1922 Mad 417 (2)). The law has been correctly summarised in Maxwell's Interpretation of Statutes, 8th edition, at page 198, where dealing with the cases of Towler v. Chatterton, (1829) 6 Bing. 258 : 130 ER 1280 and R. v. Leeds and Bradford Rly. Co., (1852) 18 QB 343 : 118 ER 129 the learned author states:—

“In both of the above cases, however, the construction, though fatal to the enforcement of a vested right, by shortening the time for enforcing it, did not in terms take away any such right, and in both it seems to fall within the general principle that the presumption against a retrospective construction has no application to enactments which affect only the procedure and practice of the Courts, even where the alteration which the statute makes has been disadvantageous to one of the parties. Although to make a law punish that which, at the time when it was done, was not punishable, contrary to sound principle, a law which merely alters the procedure may, with perfect propriety, be made applicable to past as well as future transactions, and no secondary meaning is to be sought for an enactment of such a kind. No person has a vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the time being, by or for the Court in which he sues, and, if an Act of Parliament alters that mode of procedure, he has no other right than to proceed according to the altered mode.”

14. In the present case I have already shown that the amended rule only cut down the period for filing the application for registration of the firm and there is no hardship because the time was extended by executive instructions up till the 28th February, 1953 and then till May, 1953, and a period of about six months was available to the assessee for making the application after the new rule had come into operation. It follows, therefore, that the income-tax authorities were right in holding that new R. 6 applied to the case, and the application for renewal of registration made by the assessee on the 16th November, 1954, was barred by limitation under the new rule.

15. I shall, however, assume in favour of the assessee that the old R. 6 of the Income-tax Act applied to this case and the application for renewal of registration made on the 16th November, 1954, was not barred by limitation. Even upon that assumption I think that the renewal of the registration could not have been granted to the assessee because the application was not signed personally by one of the partners, namely, Bahuria Jasopat Kuer, who owned 2 annas share in the partnership. The application has been signed by Radha Prasad Sinha as Mukhtaram of Bahuria Jasopat Kuer. Rule 6 requires that the application “shall be signed personally by all the partners of the firm”, or, where the application is made after dissolution of the firm, by all partners in the firm immediately before dissolution and by the legal representative of any such person who is deceased, and accompanied by a certificate in the form set out in the rule.

16. It is well settled that the provision of R. 6 with regard to personal signature of the partner is of a mandatory nature and must be strictly complied with. It was held by a Division Bench of this High Court in Bhuramal Palumal v. Commissioner of Income-tax, B and O, (1955) 28 ITR 62 : (AIR 1955 Pat 342.) that R. 6 of the Indian Income-tax Rules, which requires that an application for renewal of registration of a firm should be signed personally by the partners, is not ultra vires the rule making authority, and that the word “personally” in R. 6 would exclude a duly authorised agent of a partner from signing an application for renewal of registration of a firm on behalf of the partner himself.

17. The same view has been expressed by the Supreme Court in a subsequent case, Rayulu Subba Rao v. Commr. of Income-tax, Madras, 1956-30 ITR 163 : ((S) AIR 1956 SC 604) and it was held by the Supreme Court that Rr. 2 and 6 of the Indian Income-tax Rules are intra vires the powers of the rule-making authority, and the signature which is prescribed by these rules is that of the partner himself and the rules are not complied with by the agent signing the application on his behalf.

18. On behalf of the assessee Mr. S.N Datta did not dispute the principle of law contained in these authorities, but it was argued by the learned Counsel that Radha Prasad Sinha signed the application by mistake as Mukhtaram of Bahuria Jasopat Kuer and that it should be taken that he filed the application for renewal of registration as a legal representative of Bahuria Jasopat Kuer who was dead on the date of filing the application. There is no foundation for this argument, because the application does not show on the face of it that Radha Prasad Sinha signed as a legal representative of the lady, nor is it mentioned anywhere in the application that Bahuria Jasopat Kuer was dead and that Radha Prasad Sinha signed it as her legal representative. I do not, therefore, accept the argument of learned counsel for the assessee that Radha Prasad Sinha signed the application in a different capacity, namely, as the legal representative of Bahuria Jasopat Kuer. It follows, therefore, that there has been no compliance with the provisions of R. 6 and the income-tax authorities were justified in rejecting the application for renewal of registration of the firm.

19. There was also another point taken by the learned Standing Counsel on behalf of the Income-tax Department. It was submitted that the certificate given by the partners in the application with regard to the constitution of the firm was not correct. The application as printed at page 9 of the paper-book shows that Bahuria Jasopat Kuer had 2 annas share in firm and the other partners had 2 annas share each. The certificate given by the signatories in paragraph 2 of the application is that “the constitution of the firm and the individual shares of the partners as specified in the instrument of partnership so registered on 29-9-54 remains unaltered.”

20. This certificate is wrong since the number of partners of the firm and the shares allotted to each of the partners was changed with effect from the 20th of March, 1952, which was the date of death of Bahuria Jasopat Kuer. I think the argument of the learned Standing Counsel on this point is correct and the income-tax authorities were justified in holding upon this additional ground also that the application for renewal of registration should not be granted.

21. For the reasons expressed above I hold that in the facts and circumstances of the case the application for renewal of registration of the assessee firm for the assessment year 1952–1953 was rightly rejected by the income-tax authorities and the question of law referred to the High Court and as reframed by me should be answered in favour of the Income-tax Department and against the assessee. The assessee must pay the costs of this reference. Hearing fee Rs. 250/-.

22. Kanhaiya Singh, J.:— I agree.

K.S.B

23. Answered accordingly.