Pathak, J.:— This is a reference made under Section 66(3) of the Income-tax Act before its amendment in 1939 by the Commissioner of Income-tax. The question which has been referred to this Court for decision is as follows:

“Whether, in the circumstances of the case and having regard to the relevant rules framed by the Central Board of Revenue the Income-tax Officer was legally competent to refuse the renewal of registration of the assesses-firm for the assessment year 1939-1940 when the firm had been duly registered under Section 26-A of the Act and renewal of registration had been granted in previous years.”

2. The material facts giving rise to this reference are very short and may be stated thus. Three brothers, Haji Mohammad Rafi, Haji Mohammad Shafi and Haji Mohammad Sami are the assesses in this case. They carry on business in the printing and sale of religious books at Cawnpore and Calcutta. On 16th July, 1932, an instrument of partnership was executed by the assesses, by which, according to them, they constituted a partnership in which they held equal shares. During the assessment year 1932-1933, an application for registration of this alleged firm was made under Section 26-A of the Income-tax Act by the assesses. This application was granted and the firm was registered for that year. Thereafter applications for renewal of registration were made year after year and the last renewal certificate was effective until the end of the assessment year 1938-1939. On 25th November, 1939, the assesses again applied for renewal of the registration of the alleged firm for the assessment year 1939-1940 under R. 6 of the rules framed by the Central Board of Revenue in accordance with Section 59 of the Act. This application was rejected by the Income-tax Officer upon the ground that there was no firm in existence and that the instrument of partnership was a mere sham. In the result the Income-tax Officer made the assessment treating the assesses as an “association of persons.” In appeal the appellate Assistant Commissioner upheld this order. Thereupon an application was made to the Commissioner by the assesses under S. 33 and in the alternative under Section 66 of the Income-tax Act. The Commissioner took the view that the question as to whether there was an existing firm or not was a question of fact and the decision arrived at by the Income-tax Officer and the appellate Assistant Commissioner on that question was right. The Commissioner refused to make a reference to the High Court, as in his opinion, no question of law arose. Dissatisfied with the order of the Commissioner the assesses made an application to this Court, praying that the Commissioner be directed to refer to this Court questions of law arising out of the order of the appellate Assistant Commissioner. This application was granted, with the result that the question mentioned above has been referred to us by the Commissioner.

3. In order to appreciate the point in controversy it is necessary to quote S. 26A. That section is in these terms:

“26A. (1) 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 purposes of this Act and of any other enactment for the time being in force relating to income-tax or super-tax.

(2) The application shall be made by such person or persons, and at such times and shall contain such particulars and shall be in such form and be verified in such manner, as may be prescribed, and it shall be dealt with by the Income-tax Officer in such manner-as may be prescribed.”

4. It would be at once apparent from the language of this section that the existence of a firm is at condition precedent to the applicability of the section. The application has to be made on behalf of a firm and not on behalf of any individual. If there is no firm, there is nothing, to register. Rules have been framed by the Central Board of Revenue in order to carry out the purposes of S. 26a. It is necessary to examine these rules in order to judge the validity of the contention raised on behalf of the assesses. Rule 2 prescribes that an application signed by all the partners and setting out the particulars as contained in the instrument of partnership must be made within the time mentioned in that rule. Rule 3 lays down that the application must be in the form given therein and must be accompanied either with the instrument of partnership or with its copy. That form requires a certificate to the effect that the profits (or loss, if any) of the previous year have been divided or credited, and it is necessary that the apportionment of the profits and loss should be shown in the application. According to these rules, it is also necessary to mention the particulars relating to the firm. Rule 4 points out the manner in which the application has to be dealt with and lays down that in case the Income-tax Officer is satisfied that there is a firm in existence and that the application has been properly made, the certificate shall be granted. Rule 5 prescribes that the certificate of registration granted by the Income-tax Officer shall be effective only for the year mentioned therein.

5. Now we come to another set of rules which deal with the renewal of firms already registered in the previous year. Rule 6 requires that the application for renewal must be accompanied by a certificate to the effect that the constitution of the firm has not been altered it is worthy of note that this rule does not require the entry, in the application, of the particulars of partnership, nor a statement to the effect that the profits or loss have been apportioned. Rule 6a is important, as it is upon the interpretation of this rule that the decision of the question referred to us will mainly turn. That rule runs as follows:

“6A. On receipt of an application under R. 6 the Income-tax Officer may, if he is satisfied that the application is in order, grant to the assesses a certificate signed and dated by him in the following form: If the Income-tax Officer is not so satisfied, he shall pass an order in writing refusing to renew the registration of the firm.”

6. The question is whether the sense of the word “may” in R. 6a in the context is discretionary or compulsory. The contention of learned counsel for the assesses is that the word “may” in this rule means “must.” I have no doubt that the word “may” in this rule is permissive and is an enabling expression. It gives the power to the Income-tax Officer to exercise a discretion. That discretion seems to be absolute and complete. The moment the Income-tax Officer is satisfied that the form of the application is as prescribed under the rules, the matter is left entirely to his discretion. In my judgment, the expression “the application is in order” relates to the form of the application and not to the correctness of the statement made therein. The view that I am inclined to take is reinforced by the circumstance that in the same rule the word “shall” has been used by the rule making authority. In my opinion, that authority has used these two different words by way of contrast; and, while using the word “may” it gave a discretionary power to the Income tax Officer, by the use of the word “shall” it made imperative on him to pass the particular order mentioned therein. There is another circumstance which lends support to this view. As observed above, an application for renewal does not require the details of the partnership, nor does it require proof of its existence. Thus, it does not appear that any duty was cast upon the Income-tax Officer, while dealing with an application for renewal, to arrive at a definite finding upon the question of the existence of the firm before he could pass an order on such an application.

7. I am not unmindful of the cases in which it has been laid down that when the authority to whom a particular power is entrusted has got to exercise that power at the instance of a person who has got a statutory right to invoke that power, there is a duty resting upon that authority to exercise it in favour of that person. The present is not a case of that type. I cannot persuade myself to believe that it could be the intention of the rule making authority to cast a duty upon the Income-tax Officer to renew the registration of a firm, even though there was no firm in existence. Such a rule would be repugnant to the section itself and instead of carrying out the purposes of the section, would defeat its object. For this reason, I am clear in my mind that the word “may” in the rule is not imperative in character, but merely gives a discretion to the Income-tax Officer to grant a certificate on an application which is in conformity with the requirements of R. 6.

8. The power, which the Income tax Officer is to exercise, is not coupled with any duty. To hold otherwise will lead to absurdity, which will be apparent on a consideration of R. 6B. That rule provides that even where a certificate of registration or a renewal certificate has already been granted, if the Income-tax Officer comes to know that in fact there was no firm in existence, it is open to him to revoke his previous orders and cancel the certificates granted by him. It would be anomalous to hold that although he could cancel the certificates even after they had been granted, it was not open to him to refuse to grant those certificates when he became cognizant of those very facts which could entitle him to revoke his previous orders.

9. For the reasons indicated above, I would answer the question in the affirmative, and would hold that it was open to the Income-tax Officer to refuse the renewal of the registration of the alleged firm for the assessment year 1939-1940, even though the firm had been duly registered under Section 26-A of the Act and renewals of the registration had been granted in previous years.

10. Braund, J.:— I agree. In my opinion, the assesses in this case are faced with a painful dilemma. What the Income-tax Officer had to decide under R. 6A was whether the application of the assesses for renewal was in order. I do not wish to express a concluded view for myself as to what those words exactly mean. But, if the assesses accept the view which has been expressed by the Commissioner that this phrase obviously means that “the Income-tax Officer must be satisfied that the application is in order in substance and not merely in form”, then the assesses surely cannot escape from having to admit that the Income-tax Officer could go into the question whether the firm was in existence or not at the date of the application for renewal, because, as my learned brother has pointed out, that would lie at the very root of the question whether the application was “in order” in the sense referred to above. If, on the other hand, the assesses prefer to construe the words in question as referring only to the form of the application for renewal, then, in my judgment, they are in no better case. What they then have to do is to try to force the Income-tax Officer, on being satisfied merely with the form of the document of application, to grant them a certificate of renewal “whether he may desire to do so or not and indeed whether it may be proper that they should have one or not.” In other words, the assesses have to convert the word “may” into the word “must” and to deprive the Income-tax Officer of the smallest discretion, so as in the end to reduce his Income-tax Officer's functions merely into those of clerk issuing a renewal certificate on demand.

11. In my opinion the adoption of this later construction would be to reduce the whole rule to an absurdity; and not less so when we read the very next rule and observe that, having been forced to issue the renewal certificate he might ten seconds later, under Rule 6B, again revoke it.

12. The true meaning, as I see it, of Rule 6A is this. In Section 26-A of the Income-tax Act all that is referred to is the registration of a firm. Nothing is said there about the renewal of a registration of a firm which has once been registered. It is true that under Section 59 of the Income-tax Act there are certain powers to make rules. What the rule-making authorities have done in this case is to make rules, not merely for registration, but also for the renewal of a registration, which is something that, in terms at any rate, the Act itself has not legislated for. No doubt, the rule-making authority has done this for the purpose of simplifying the procedure. It has in effect said that it shall not be necessary year by year to make a fresh application under S. 26A; but it shall be sufficient if, registration having once been effected, that registration is from time to time renewed. It is what may be described as a “short cut.” Now, reverting again to Rule 6A, we are in a position to see that the authority which made these rules has been very careful and deliberate in what it has done. It has said that, where the Income-tax Officer is not satisfied that the application to travel by the “short cut” is in order, the Income-tax Officer is bound to refuse it and to send the applicant to the long way round. On the other hand, it has said something quite different in the case of the Income-tax Officer being satisfied that the application is in order. It has said that he “may” in that case grant a certificate of renewal. The distinction between the discretion implied in the word “may” and the peremptory emphasis of the word “shall” in this rule is most marked and, in my judgment, it would be quite impossible to say that the rule making authority, when it employed the word “may”, did not intend it to have its usual discretionary force. As Lord Justice Cotton has said in (1890) 44 Ch. D. 2621:

“It may be a question in what case, where a Judge has a power given to him by the word “may”, it becomes his duty to exercise that power.”

13. Accepting the whole of that, it seems to me to be an impossible solution of this difficulty to suggest that the Income-tax Officer had a “duty” to renew a certificate when he knew, or may have known or may have been in possession of facts or suspicions showing that no genuine firm existed at all. As I have said before, a construction such as that would be reducing the rule to an absurdity.

14. The order of the Court is accordingly that the question referred to us by the Commissioner of Income-tax, United Provinces, Central Provinces and Berar, should be answered in the affirmative.

15. The assesses must pay the costs of this Reference.

16. A copy of this order is to be sent to the Commissioner of Income-tax, United Provinces, Central Provinces and Berar under the seal of the Court.

17. The fees of the Legal Adviser to the Income-tax Department will be taxed at the sum of a hundred and fifty rupees. Six weeks time will be allowed to the Legal Adviser to the Income-tax Department to file his certificate.

18. Question answered.