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Income‑tax Reference No. 707 of 1972, decided on 11th October, 1983.

‑‑ S.26‑.A‑Income‑tax Rules, 1922, r.3‑‑Registration of firm- Assessment beginning on 1‑7‑1969 ‑‑ Firm not registered with Registrar of Firms at time of filing application under S. 26‑A‑‑Sec tion 26‑A (5), held, not applicable‑Firm entitled to registration on application under S. 26‑A read with r. 3, Income‑tax Rules, 1922, in circumstances.

I. N. Pasha for Appellant.

Waheed Farooqi for Respondent.

Date of hearing : 11th October, 1983.

‑The applicant/assessee has filed the application under section 66 (1) of the Income‑tax Act raising four questions but during argument only question No. 2 has been pressed which reads as follows :‑

"Whether having regard to the provisions of section 26‑A of the Income- tax Act and rule 3 (2) of the Income‑tax Rules the applicant firm was entitled to registration under section 26‑A of the Income‑tax Act

On 19-4‑1969 the applicant firm filed statement for registration sunder section 58(1) of the Partnership Act with the Registrar of Firms, Karachi. The registration was granted by the Registrar on 3‑6‑1969. After filing a state ment for registration as required by section 58 of the Partnership Act and before it was granted, on 23‑4‑1969 the applicant made an application for registration under section 26‑A of the Income‑tax Act for the assessment year 1970.71. During assessment proceeding the Income‑tax Officer observed that as the application for registration under section 26‑A was filed before the grant of registration of firm under the Partnership Act the provisions of section 26 (5) have not bees complied with. The applicant, therefore, filed a duplicate application under section 26‑A for the assessment year 1970‑71 alongwith a letter, dated 30th April, 1971 requesting the Income‑tax Officer to consider the said application and condone the delay in filing it. The Income‑tax Officer refused registration and passed the following order :‑

"Application has been filed for registration of the firm, on 23‑4‑1.969. A copy of partnership agreement has been obtained and placed on record. The firm appears to be genuinely constituted. On scrutiny of record, however, it is observed that at the material time of filing of application under section 26‑A the assessee concern was not registered with the Registrar of Firms. In view of provisions of 26‑A (5) registration of firm trust be refused. Subsequent application under section 26‑A and a request for condonation of delay on that application cannot be considered as it is tantamount to violation of the spirit of section 26‑A (5). The concern is treated as U. R. F."

The applicant filed appeal before the Income‑tax Appellate Tribunal, which was dismissed.

In this regard it is proper to reproduce section 26‑A (v) of the Income‑tax Act: (v) No application under this section for registration or renewal of registration in respect of the assessment for the year beginning on the 1st July, 1969 or for any year, thereafter shall be made unless the partnership has been registered under the Partnership Act, 1932."

This subsection was added in the Income‑tax Act by Finance Act of 1968.

The most important aspect of the case which has completely escaped the notice of the learned Tribunal is that section 25‑A (5) was not applicable to the case of the applicant. This subsection imposes a pre‑condition the no application for registration shall be filed unless tile firm was registered under the Partnership Act. It also provides that this condition will apply in respect of the assessment beginning on 1‑7‑1969 or any year thereafter. Therefore, this subsection will not apply in respect of assessment beginning, before 1‑7‑1969. In the present case the assessment was framed for the period commencing from 16‑4‑1969. In these circumstances the application originally filed on 23‑4‑1969 could not be dismissed as incompetent and hit b section 26‑A (5). The Income‑tax Officer and the learned Tribunal completed overlooked this aspect. The applicant was, therefore, entitled to registration under section 26‑A read with rule 3. As the original application was competent filing of duplicate application and applicability of rube 3 (2) is irrelevant to the present controversy.

We, therefore, answer the Reference in the Affirmative.

M. Z. M. Reference answered.

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