V.V. Kamat, J.
1. There are two assessees, namely, Providence Estate and Shanti Estate, both of Poomulla who are concerned each with regard to the assessment years 1978-79, 1979-80, 1980-81 and 1981-82. Separate assessment orders are also available in the print in the nature of annexures A, A1, A2 and A3 on the one hand and A4, A5, A6 and A7 on the other, respectively, in regard to them.
2. The two assessees expect our answer to the following two questions :
'1. Whether, in the facts and circumstances of the case, the Tribunal is justified in their view that it is necessary that the instrument of partnership should have been in existence in the accounting year in respect of which assessment is being made ?
2. Whether, in the facts and circumstances of the case, registration can be granted with retrospective effect even without the existence of instrument of partnership during the relevant period in view of the provisions contained in Section 27 of the Agricultural Income-tax Act ?'
The question of assessment is under the provisions of the Agricultural Income-tax Act, 1950. Section 3 is the charging section with reference to each financial year on the total agricultural income of the previous year of every person. Section 2(j) tells us that the financial year is to be reckoned as beginning on the 1st day of April and ending on the 31st day of March, of the following year. As against this situation with regard to the calculation of taxation of the total agricultural income of the previous year, the assessee has the option to vary the meaning of the expression 'previous year' on the basis of his accounts made up by him. As such the assessee's previous year is from January 1, to December 31, of the year in question.
2. Section 27 of the Act deals with the procedure in registration of firms. It enacts as follows :
'27. Procedure in registration of firms.--(1) Application may be made to the Agricultural 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 agricultural 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 Agricultural Income-tax Officer in such manner as may be prescribed.'
The question is as to whether the instrument of partnership is a must for registration under the above provision and as to whether it can be understood retrospectively in the context of factual existence of the partnership though oral relatable to the earlier date.
3. After hearing learned counsel for the assessee as well as the learned Government Pleader for the Commissioner of Agricultural Income-tax, Trivandrum, we find certain obvious situations revealing peculiarities of facts. They are found in detail in the order of the first appellate authority --the Deputy Commissioner (Appeals), Agricultural Income-tax and Sales Tax, Kozhikode.
4. The facts reveal that two persons, namely, one Rev. Fr, Mathew, Panjikkattil of Mary Giri, Tiruvalla, and Rev. Sr. Mary Elisuba of Holy Spirit Sisters Convent, Thukalassery, Tiruvalla, managing partner of the partnership firm 'Santhi Estate', Poomulla, entered into an agreement of sale with the previous owners of the property and in part performance of the said agreement of sale dated October 27, 1977, possession was taken by the prospective buyers referred to hereinbefore.
5. Thereafter, throughout the properties covered by the agreement of sale were managed by the two firms jointly and combined accounts were kept regarding the income and expenses. It is further seen that income is declared by each of them by filing returns separately at 50 per cent. of the total income for the entire properties. This continued. Final sale deeds came to be executed on March 10, 1981, and March 16, 1981, and they were in the name of the managing partner and also the chief executive of the firm on behalf of the partnership firm--Providence Estate with regard to the first property and managing partner and another partner of the other partnership firm-Shanthi Estate, Poomulla. This was on the day specified above. It is plain and undisputed that this is much after the last of the financial years (1981-82) in these proceedings, needless to state that the previous year in regard thereto would be from January 1, 1980 up to December 31,. 1980.
6. At or about this time, on March 15, 1981, a partnership deed came into existence on the basis of which a claim under Section 27 of the Agricultural Income-tax Act, 1950, was made by the two assessees to treat their assessment proceedings as proceedings of the registered firms with retrospective effect.
7. Apart from the position with reference to the above factual matrix the two appellate authorities relied on the decision of the Supreme Court in R. C. Mitter and Sons v. CIT : [1959]36ITR194(SC) , dealing with the situation under Section 26A of the Indian Income-tax Act, 1922 (11 of 1922), which is ad verbatim identical with the present section. The apex court has laid down the following conditions (headnote) :
'In order that a firm may be entitled to registration under Section 26A of the Income-tax Act, the following essential conditions must be satisfied, viz. ;--
(i) the firm should be constituted 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 particulars as set out in the rules must be made ;
(iii) the application should be made before the assessment of the firm under Section 23, for that particular year ;
(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 instrument ; 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.'
It is obvious that the requirement is that the partnership must be genuine and must actually have existed in conformity with the terms and conditions of the instrument of partnership which is registered.
8. The factual matrix shows that the alleged existence of the partnership firms appear for the first time by way of recitals in the instrument of partnership and the situation spelt out hereinbefore by us' makes it abundantly clear that there was no whisper in regard to the existence of an oral partnership at any time between October 27, 1977, up to March 15, 1981, for over a period of four years during which the total income for the whole properties reflected on the basis of 50 per cent, through the returns declared by the purchasers. Apart therefrom, as stated at the outset, the instruments of partnership have come into existence long after the last financial year in regard to the assessments in question.
9. For the above reasons, question No. 1 is answered in the affirmative, question No. 2 is answered in the negative. In other words, both the questions are answered against the assessee and in favour of the Revenue.
10. A copy of the judgment under the seal of this court and the signature of the Registrar shall be sent to the Agricultural Income-tax Appellate Tribunal, Additional Bench, Kozhikode, for passing consequential orders.