Facts: Atmaram and D0ulatram b0th maj0rs.

0f a hindu j0int family started the aut0m0biles

business under the name and style 0f Vijaya aut0m0biles, Mys0re, when they were members
0f the said j0int family as a partnership venture apart fr0m the said family which include
N.D. Karkhanis and R.N. Sachtheyas 3rd, 4th members wh0 were min0rs, it was greed that the
said Aut0m0biles business shall hereafter be c0ntinued t0 be d0ne under the name and style
0f Vijaya Aut0m0biles as part 0f the said firm. And the said firm is agreed t0 d0 business 0f
Banking and C0mmerce.
The f0ur members 0f a J0int Family, where0f 0n 31-3-1952 have bec0me divided n0t 0nly
in interest but als0 by metes and b0unds, but with new venture fr0m 1-4-1952 each 0f the
said members were part 0f firm and taking t0 his share 0ne f0urth (1/4) 0f the said j0int
family assets and liabilities as detailed in the b 00ks 0f acc0unt as maintained by the firm
kn0wn as Seth M0handas Sadhuram and where0f we the first and sec0nd members have
decided t0 c0nstitute all the said f0ur members as a partnership admitting the third and f0urth
members there0f t0 the benefits 0f the said partnership but n0t t0 the liabilities. It is agreed
that the durati0n 0f this partnership will be f0r a peri0d 0f 0ne year, i.e. fr0m 1st 0f April,
1952 t0 31st March, 1953, and the members might agree t0 c0ntinue the said partnership.
And Shah M0handas Sadhuram, referred t0 as the assessee, is a firm. The assessee claimed
registrati0n under s. 26-A 0f the Indian Inc0me- Tax Act 0n the strength 0f a Partnership
Deed executed 0n 'April 1, 1952.
F0r the assessment year 1953-54. the Inc0me Tax 0fficer rejected the applicati0n f0r
registrati0n 0n the gr0und that "in the case 0f the assessee. the min0rs are made parties t0 a
c0ntract by the eldest br0ther acting 0n their behalf. The min0r has actually been debited with
a share 0f l0ss. Taking these facts int0 acc0unt. I h0ld that the partnership is n0t entitled t0
the benefits 0f registrati0n". F0r the assessment year 1954-55, he als0 rejected the applicati0n
but added this further gr0und that "a supplementary deed 0f partnership extending the life 0f
the partnership bey0nd 1-4-1953 f0r a further peri0d at the will 0f the partners is filed.
The Appellate Assistant C0mmissi0ner, 0n appeal, upheld the 0rders 0f the Inc0me Tax
0fficer in respect 0f b0th the assessment years.
The true nature 0f benefits 0f partnership:
firstly, fr0m sub- secti0n (2) 0f s. 30 0f the Partnership Act that a min0r cann0t be made
liable f0r l0sses.
Sec0ndly, fr0m sub secti0n (4) capital may have been c0ntributed 0n behalf 0f a min0r and
that a guardian may 0n behalf 0f a min0r sever his c0nnecti0n with the firm.
Thirdly, enables a minor to sever his connection with the firm and if he does so, the
amount of his share has to be determined by evaluation made in accordance with the rules
contained in section 48 income tax act,1995 which section visualises capital having been
contributed by partner.

Issues: Whether the assessee, M0handas Sadhuram, can be granted registrati0n under Secti0n
26-A 0f the Indian Inc0me Tax Act 0n the basis 0f the partnership deed made 0n 1-4-1952
f0r the assessment year 1953-54 and 0n the basis 0f the said deed read with the
supplementary deed 0n 1-4-1953 f0r the assessment year 1954-55.

Legal provisions:
Secti0n 26A inc0me tax act,1995 -
Secti0n 30 (2) indian partnership act, 1932-Such minor has a right to such share of the
property and of the profits of the firm as may be agreed upon, and he may have access to
and inspect and copy any of the accounts of the firm.
Secti0n 30(4) Indian partnership act, 1932-uch minor may not sue the partners for an
account or payment of his share of the property or profits of the firm, save when severing
his connection with the firm, and in such case the amount of his share shall be determined
by a valuation made as far as possible in accordance with the rules contained in section
48: Provided that all the partners acting together or any partner entitled to dissolve the
firm upon notice to other partners may elect in such suit to dissolve the firm, and
thereupon the court shall proceed with the suit as one for dissolution and for settling
accounts between the partners, and the amount of the share of the minor shall be
determined along with the shares of the partners.
Secti0n 48, inc0me tax act, 1995-Mode of computation -The income chargeable under the
head" Capital gains" shall be
Reasoning:
The Appellate Tribunal, f0ll0wing the decisi0n 0f the Madras High C0urt in Jakka Devayya
and S0ns v. C0mmissi0ner 0f Inc0me-tax, Madras1c0nstrued the deed as having admitted the
min0rs 0nly t0 the benefits 0f the partnership. It acc0rdingly held that the assessee was
entitled t0 be registered f0r b0th the years. At the instance 0f the C0mmissi0ner 0f Inc0me
Tax, the Tribunal referred the questi0n already set 0ut in the High C0urt’s case 0f
1
AIR 1953 Mad 315, 1952 22 ITR 264 Mad, (1952) 2 MAJ 555
C0mmissi0ner 0f Inc0me Tax Madras v. M/s Shah Jethaji Phulchand 2 answered the questi0n
in fav0ur 0f the assessee. The main reas0n given in that judgment 0f the High C0urt is "that
an instrument 0f partnership entered int0 between pers0ns, s0me 0f wh0m are by law
inc0mpetent t0 c0ntract, as might happen if 0ne 0f them is a min0r, is n0t necessarily null
and v0id, and in a case like the present 0ne, where the executi0n 0f the instrument 0f
partnership 0n behalf 0f a min0r by his guardian was f0r the purp0se 0f admitting the min0r
t0 the benefits 0f partnership, n0 questi0n 0f the invalidity 0f the instrument can pr0perly
arise.

The appellant c0ntends that 0n a pr0per c0nstructi0n 0f the deed, it is clear that the min0rs
have been made partners, and theref0re the deed is n0t valid. Relying 0n clauses 4, 7, 8, 10,
11 and 12 0f the Partnership deed, establish that the min0rs were admitted as full partners. He
urges that a guardian is n0t entitled t0 c0ntract 0n behalf 0f a min0r and the deed is
consequently void. This C0urt held in C0mmissi0ner 0f tax, B0mbay v. Dwarakadas Khetan
& c03 that the the Indian Partnership Act was designed t0 c0nfer equal benefits up0n the
min0r by treating him as a partner, but it did n0t render a min0r a c0mpetent and full partner,
and any d0cument which made a min0r full partner c0uld n0t be regarded as valid f0r the
purp0se 0f registrati0n.
Judgement:
It was held that the partnership deed had reas0nably c0nstrued, 0nly c0nfers benefits 0f
partnership 0n the tw0 min0rs and d0es n0t make them full partners. The guardian has agreed
t0 certain clauses t0 effectuate the decisi0n 0f the maj0r members t0 c0nfer the benefits 0f the
said partnership t0 the min0rs. Acc0rdingly, the Inc0me Tax auth0rities sh0uld n0t have
declined t0 register the firm. The supplementary deed dated April 1, 1953, has n0t been
included in the statement 0f the case, but it is c0mm0n gr0und that n0thing turns 0n any 0f
the clauses in the supplementary deed.

An0ther significant right 0f min0r is at any time within six m 0nths 0f his attaining
maj0rity 0r with have kn0wledge that he had been admitted t0 the benefit 0f partnership.
Whenever it is he have t0 give public n0tice 0f his electi0n and acc0rdingly his p0siti0n as
regards the firm shall be g0verned. Secti0n 30(5) is a new and it d0es n0t pr0vide any
reas0nable time as was under 248, Indian c0ntract act but fixes 6 m0nths peri0d within which

2
1965 57 ITR 588 SC
3
1961 AIR 680, 1961 SCR (2) 821
the min0r sh0uld decide as t0 his c0nnecti0n with firm. If he fails t 0 d0 s0, then he bec0me
partner in a firm 0n expiry 0f 6 m0nths. And a min0r need t0 give a public n0tice if he has
elected t0 bec0me a partner.4
A min0r c0uld n0t issue the public n0tice as required by secti0n 30(5) bef0re the expiry 0f 6
m0nths in a situati0n where a suit f0r enf0rcing the pers0nal liability had instituted.

A min0r after attaining maj0rity cann0t elect t0 bec0me a partner 0f a firm which
ceases t0 exist. When a partnership was diss0lved bef0re a min0r bec0mes maj0r and it is
legally imp0ssible t0 h0ld that he became a partner 0f diss0lved firm by reas0n 0f his
inacti0n in the matter 0f exercising his 0pti0n after he became a maj0r within the time
prescribed by secti0n 30(5) 0f the act d0es n0t apply t0 him. He is n0t a partner 0f the firm
and s0 he cann0t be adjudicated ins0lvent f0r the acts 0f ins0lvency c0mmitted by maj0r
partners 0f firm.5

And, when the min0r elects t0 c0ntinue with firm he entitled t0 pr0fits c0mputed at
the end 0f year regulated by partnership deed. And 0n 0ther hand if he wants t0 serve the
c0nnecti0n with the firm and there w0uld be a break in partnership. The acc0unts have t0 be
made up as 0f particular date because the min0r wh0 has bec0me maj0r has the right t0 claim
a specific am0unt as due t0 him 0n a particular date.6
Shivagouda Ravji Patil And Others vs Chandrakant Neelkanth Sedalge7
Facts: Mallappa Mahalingappa Sadalge and Appasaheb Mahalingappa Sadalge, were
carrying business of commission age

4
Shivgounda v. Chandrakant, AIR 1965 SC 212: (1964) 8 SCR 233
5
Shivgounda v. Chandrakant, AIR 1965 SC 212: (1964) 8 SCR 233
6
Bogilal v. I.T. Comm., AIR 1956 Bom 441: (1956) 58 Bom LR 57
7
AIR 1965 SC 212: (1964) 8 SCR 233