P L D 1964 Dacca 373 (PLP)

"We ought to give the words their plain, literal and natural meaning where we do not see from its scope that such meaning would be inconsistent or would lead to maniford injustice." Their Lordships of the Supreme Court of India in the case referred to above while interpreting the section, as it then stood, as I have already observed, expressed themselves in the following terms: "The section does not say that the firm must be constituted by the instrument of partnership. It does not require that the firm must come into existence by reason of the instrument of partnership, or that the firm should be the creature of the instrument of partnership or that the firm must not exist prior to the instrument of partnership being executed."

53. The term 'constituted' upon which stress was given both by Chakravartti, C. J., and the Supreme Court of India has not doubt a wider meaning as observed by their Lordships of the Supreme Court of India. But the use of it, as has been observed by Chakravartti, C. J., in relation to a firm or such other body, meant creation of it. The Oxford Dictionary, Volume II at page 1152 gives the meaning 'created' as one of the meanings of the word 'constituted'. Similarly, the same Dictionary, at pages 875 and 876 gives one of the meanings of the word 'constitute' as 'create'.

54. Now, the point is, as to whether the expression 'constituted by' would mean a thing different than 'constituted under'. Following the observations of their Lordships of the Appeal Court, in the case of The Queen v. The Registrar of the Joint Stock Companies, and in the case of Davidson v. Myrtle, it has been observed by the learned Chief Justice of the Calcutta High Court (A I R 1956 Cal. 303) that the grammatical meaning of the word 'by' is clearly different from the meaning of the word 'under.'

55. The word 'by' connotes a different meaning than the word 'under'. For instance, a company is set up or created by a statute, and a company incorporated under a statute. In my opinion, the words 'constituted by' as used in the section under our consideration, has been used in relation to a firm that has been constituted by a document, or in other words, a firm that has been brought into existence by the force of a partnership deed. This view of mine finds support from the judgment of Chagla, C. J., when he, in dealing with the interpretation given to the section containing the phrase 'constituted under', by the learned Chief Justice of Calcutta High Court, observed: "The section does not say that the firm must be constituted by the instrument of partnership. It does not require that the firm must come into existence by reason of the instrument of partnership, or that the firm should be the creature of the instrument of partnership, or that the firm must not exist prior to the instrument of partnership being executed." From this I feel that the learned Chief Justice of the Bombay High Court made it very clear that if the Legislature used the word 'constituted by' then the interpretation given by Chakravartti, Chief Justice of the Calcutta High Court, to the section would have been absolutely correct.

56. The only decision of our Court that was cited before us, was, in the case of the Commissioner of Income‑tax, E. Bengal v. Messrs Rashid Motors, Chittagong (P L D 1957 Dacca 459). The section in that case also, that came up for consideration contained the phrase `constituted under' and not `constituted by,' and a Division Bench of this Court did not agree with the views expressed by Chief Justice Chakravartti of the Calcutta High Court, but agreed with the views expressed by Chagla, Chief Justice of Bombay High Court, or, in other words, the Division Bench of this Court did not like at that time to read 'by' for the word 'under' in the section which the learned Chief Justice of the Calcutta High Court bad done. In the case of Commissioner of Income‑tax, South Zone v. Radio Hotel, Karachi and others (P L D 1959 Kar. 539), a Division Bench of the West Pakistan High Court considered section 26‑A (A), as it then stood, i.e., containing the phrase 'constituted under' and their Lordships also were of the view that the phrase could not be interpreted to mean that the partner ship must originate from the document of partnership. Their Lordships took into consideration the Full Bench decision of the Punjab High Court 37 I T R 349 wherein no difference was made between the meaning of the word 'by' and the meaning of the word 'under', their Lordships of the West Pakistan High Court did not agree with the view expressed by the Full Bench of the Punjab High Court, that the word 'by' and the word 'under' means the same thing. I entirely agree with the views expressed by their Lordships of the West Pakistan High Court that the Full Bench decision of the Punjab High Court was not right in giving the same meaning to the two phrases 'constituted by' and 'constituted under'.

57. In my opinion, the interpretations given to the section, prior to its amendment, by the Supreme Court of India, by the Dacca High Court and by the West Pakistan High Court in the cases referred to above was quite correct, as the grammatical meaning of the word 'under' is quite different from then grammatical meaning of the word 'by' as has been held after an elaborate discussion on the subject by the Chief Justice of the Calcutta High Court, in the case of R. C. Mitter & Sons v. The Commissioner of Income‑tax, West Bengal.

58. But in the changed circumstances, i.e., after the amend ment of the section in 1957 by which the phrase 'constituted under' was substituted by the phrase 'constituted by' the meaning of the section with reference to partnership firm for the purpose of its registration under the Income‑tax Act has changed. In my opinion, the phrase 'constituted by' as used in section 26‑A (1) in reference to firm must mean 'created' by the partnership deed. The section, as it stands, therefore, means that a partnership firm that has been brought into being by a partnership deed only can claim c registration under section 26‑A of the Act from the date of the deed, and a partnership firm that originated from verbal agreement, the terms of which are incorporated in a deed at a subsequent date, cannot claim registration with retrospective effect.

59. In my opinion, therefore, the partnership firm in the present case came into being on 10th October 1957, for the purpose of section 26‑A, on which date the partnership was executed, and not on 1st April 1957, to which date retrospective effect was given by a clause in the deed. If it is held that the partnership came into being on 1st April 1957, as is claimed by the assessee then, we shall have to reconstruct the section and read `under' in place of `by', which we cannot do, and if we do, we shall be committing the same mistake, if I may say so with respect, as was committed by Chakravartti, C. J., in the case of R. C. Mitter & Sons v. Commissioner of Income‑tax, Calcutta.

60. We cannot be forgetful of the fact that this registration as I have already observed, is for the purpose of Income‑tax under section 26‑A. According to me, if any partnership firm wants the benefit of paying lesser tax by registering it under section 26‑A of the Income‑tax Act, it must conform to the provisions of the law, as has been observed by Justice Munir, C. J., in the case of Commissioner of Income‑tax v. Messrs Maula Dad Muhammad Saeed and also by the Supreme Court of India, in the case of R. C. Mitter & Sons v. Commissioner of Income‑tax, Calcutta, and also by their Lordships of the Punjab High Court in the case of Niadar Mal Jagadish Prasad v. Commissioner of Income‑tax, Simla.

61. The Appellate Tribunal has expressed itself saying that the partnership came into existence on the 10th May 1957, and sought to be registered for the accounting year 1957‑58, that is, from 1st April 1957 to 31st March 1958, and, therefore, it was not co‑extensive with the account period, and as such, could not be registered.

62. I have my doubts on this point, because I do not find any provision in the Income‑tax Act which bars the coming into existence of a partnership firm in the middle of or at any time in a particular accounting period. Suppose this particular document of the 19th May 1957, would not have had the clause (4) in it, which reads, that partnership shall commence from the 1st April 1957, could the Income‑tax Authority refuse to register this firm with effect from 10th May 1957, if it would have fulfilled all other conditions of section 26‑A (1) and the rules framed thereunder for taxation purpose for the accounting period 1957‑58? I think not.

63. Although in the decision of the Full Bench of the Punjab High Court, reported in 37 I T R 349 a view has been taken that a period for which the registration has been asked for, the partnership must be co‑extensive with it. I cannot persuade myself to agree with that view of their Lordships of the Punjab High Court in all respects. There is no dearth of in stances where for the same account period two different heads of income can be returned by an assessee. In the present case, there would be no difficulty in my opinion for the Income‑tax Authority to assess this partnership firm with effect from 10th May 1957, after giving it registration from that date up to the end of the account period, that is, the 31st of March 1958, and to apportion the profit and loss to the partners according to their share, and then to add p their other income with the income of partnership business, as the firm is not taxable, but its partners are in their individual status. The profits of the business from 1st April 1957 up to 9th May 1957, will be that of Noor Hossain alone.

64. The Appellate Tribunal did not or could not say that by the deed of partnership of the 10th May 1957, the partnership did not come into existence at least on that date. Therefore, in the absence of any provision that a partnership cannot come into existence in the middle of account period or that it cannot be taxed for a part of the account period, I am of the view that the partnership firm can be registered for the period from 10th May 1957 to 31st March 1958, as a partnership firm if it fulfils all other conditions as laid down by section 26‑A and the rules framed thereunder.

65. I would, therefore, answer the question referred to us in the following manner.

66. That the registration of the partnership firm as evidenced by the partnership deed executed on the 10th of May 1957, for the account period from 1st April 1957 to 9th May 1957, was rightly refused by the Income‑tax Tribunal in terms of section 26‑A (1) of the Act but it could not be so refused for the period from 10th May 1957 to 31st March 1958.

67. A circular issued by the Central Board of Revenue, Karachi, dated 27th April 1957, was placed before us by Mr. A. F. M. Mesbahuddin, the learned Advocate for the Com missioner of Income‑tax, East Pakistan, on Mr. Siddique Ahmed Chowdhury, the learned Advocate for the assessee firm, having pointed out the existence of the aforesaid circular. The relevant paragraph of the circular relating to section 26‑A runs as follows :‑ "Section 26‑A.‑Registration of firms: The amendment made in subsection (1) clarifies that the instrument of partnership shall be in writing. Subsection (4) has also been amended and brought in line with subsection (3) which envisages a written partnership deed which should have been in existence in the relevant previous year. On a strict interpretation of the law, a firm can be registered only from the date on which the partnership deed has been executed. Since this would create hardship, the Board is disposed to agree to the benefit of registration being allowed for the full previous year in which the instrument of partnership is executed, provided of course the other conditions laid down for the registration of the firms under section 26‑A are fulfilled. It should be noted that under rule 2 of the Income‑Tax Rules, in the case of a new firm, an application, for registration, which is to be accompanied by the instrument of partnership in original or a certified copy thereof, has to be filed before the end of the previous year or, where the firm is not registered under the Partnership Act, 1932, or the deed of partnership is not registered under the Registration Act, 1908, within six months of the constitution of the firm, whichever is earlier. Thus, retrospective effect can be given to a deed for morn than six months."

68. From this it was contented by Mr. Siddique Ahmed Chowdhury, the learned Advocate for the assessee firm‑, that the Income‑tax Authorities should have registered the partnership firm in this case in terms of the direction given therein, as all other conditions have been fulfilled by the firm for registration. Since the letter of reference and the question formulated by the Income‑tax Appellate Tribunal do not contain any reference to the above‑quoted circular and also because the answer to the question does not depend on the circular but on the interpretation of the Act, I refrain from commenting on the contents of the circular. It is for the assessee to raise the issue of the circular before the Income‑tax Authorities and claim benefit there under. [On account of difference of opinions amongst the Judges of the Division Bench the question was referred to Murshed, J., the 3rd Judge under clause 36 of the Letters Patent Act. MURSHED, J.‑This is a reference under clause 36 of the Letters Patent upon a disagreement between two Judges of a Division Bench of this Court and it has arisen out of the following circumstances: A reference was made under section 66(1) of the Income- tax Act upon a question framed by them in the following terms: `Whether on the basis of the deed of partnership executed on 10th May 1957, registration claimed for the previous year from 1st April 1957 to 31st March 1958, was rightly refused for the tax year 1958‑59?"

70. For a proper appreciation of the points involved in this case, I propose to set out the provisions of section 26‑A (1) of the Act, which are as follows: "Application may be made to the Income‑tax Officer on behalf of any firm, constituted by 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."

71. It is sufficient to state in substance, the facts of this case as follows: One Noor Hossain, a contractor, obtained a contract for supply of food and medicine to the Medical College Hospital and the Mitford Hospital, Dacca, in March 1957. On the 8th of April 1957, the said Noor Hossain deposited the security amount, and on the 10th of April 1957, he and three other persons, namely, Abdul Malek, Abdul Hakim and Shahzada entered into a partnership by an oral agreement. Thereafter, on the 10th of May 1957, a deed of partnership was executed by the aforesaid four persons, which set out in detail the terms and conditions of the partnership. After that an application, dated the 30th of October 1957, was filed for the registration of the aforesaid firm as shown in the said deed of partnership, under the provisions of section 26‑A of the Act. Along with the said application the aforesaid document, dated the 10th of May 1957, was filed as well as various other documents. The assessee firm claimed benefit under section 23(5) of the Act for assessment year 1958‑59.

72. The Income‑tax Officer refused to register the firm on the ground that the said application was made after the lapse of a period of six months from the Constitution of the said firm and also on the further ground that he was not satisfied with regard to the genuineness of the partnership.

73. On appeal to the Appellate Assistant Commissioner by the assessee firm, it was held that the filing of the application for the registration of the partnership firm was neither beyond the prescribed period of limitation nor was there sufficient evidence before the Income‑tax Officer to hold that the partnership firm was not a genuine one.

74. Against the aforesaid decision, the Commissioner of Income‑tax preferred an appeal to the Income‑tax Appellate Tribunal which reversed the decision of the Appellate Assistant Commissioner and disallowed the application of the assessee firm at whose instance the present reference under the aforesaid section 66(1) of the Act has been made. In reversing the decision of the Appellate Assistant Commissioner, the said Tribunal has observed as follows: "As no firm can come into existence without a deed, the firm did not exist under the law not only during that part of the financial year from 1st April 1957 to 9th May 1957, but that the firm cannot be said to be co‑extensive with the financial year of the contracts of the Medical College and Mitford Hospital which were to run from 1st April 1957 to 31st March 1958. In that view of the matter, there was technically no genuine firm existing during the whole of the year under assessment. It may be said that if a part of the period cannot be covered that part may be excluded and the part which is covered by the instru ment should be given effect to. The form of certificate in rule 4 indicates that registration for a part of the year is not contemplated. The assessee had applied for registration for the whole year, the trading, profit sand loss accounts partners account and the balance‑sheet had been prepared for the entire period converting the financial year from 1st April 1957 to 31st March 1958. The business of the firm cannot under the law being from any date prior to the execution of the deed on 10th May 1957, and as such this firm cannot be regarded as genuine during the year under appeal. If the assessee so desires he may claim registration for the next year on the basis of his very deed as the defect for which he is being refused registration during this year will not be there."

75. In coming to the aforesaid conclusion, the Tribunal has again observed as follows: "The material question hinges upon the problem as to whether there was a partnership during the year of account co‑extensive with the contract from 1st April 1957 to 31st March 1‑

958. Application for registration requires to be made under section 26‑A(1) on behalf of any firm constituted by an instrument `constituted by' were substituted in place of `constituted under' with retrospective operation from April 1955 According to the changed words, there is no more scope for saying that a firm may come into being even without any instrument. In the present case the firm purports to have come into existence from 1st April 1957, which is one month 9 days before the execution of the deed of partnership."

76. I have underlined the aforesaid passages with a view to make their meaning clear. From the observations quoted above it is patent that the Tribunal has taken the view that the words, "constituted by" in section 26‑A(1) of the Act do not preclude from registration a pre‑existing partnership, the terms of which were incorporated subsequently in a written document. The only question, which has governed its decision is, what should be the accounting year for the assessee firm having regard to the date of the execution of the partnership deed? It has not come to a finding that the partnership did not, in fact, exist prior to the execution of the said deed of partnership. It has merely said that it was "technically" non‑existent prior to its constitution by a written instrument.

77. In the Division Bench, who heard the reference, the difference of opinion naturally turned round the construction of the words "constituted by". The learned Chief Justice has taken the view that there is no justification for holding that the words "constituted by" mean "created by". He is of opinion that there is no warrant for substituting the word "created" for the word "constituted". Siddiky, J., has interpreted the words "constituted by" to mean "created by" and reference have been made in both judgments that have been pronounced to decisions of the Indian High Courts and those of the Supreme Court of India and of Courts in Pakistan.

78. In answering the question posed by the reference, the learned Chief Justice has taken the view that the application of the assessee firm for registration under section 26‑A of the Act was wrongly rejected, whereas Siddiky, J., has arrived at the conclusion that it was rightly so done. Siddiky, J., in expressing his decision, has observed as follows: "In my opinion, the phrase `constituted by' as used in section 26‑A(1) in reference to firm must mean `created' by the partnership deed. The section, as it stands, therefore, means that a partnership firm that has been brought into being by a partnership deed only can claim registration under section 26‑A of the Act from the date of the deed and partnership firm that originated from verbal agreement, the terms of which are incorporated in a deed at a subsequent date, cannot claim registration with retrospective effect." He further proceeded to make the following observations, which appear to me to be most significant: "The Appellate Tribunal did not or could not say that by the deed of the partnership of the 10th May 1957, the partnership did not come into existence, at least, on that date."

79. It is evident from the above passages, underlined by me, that Siddiky, J., has taken the view that the words "constituted by" do not mean creation, by a written instrument, for the first time, of a partnership which did not exist, by oral agreement, prior to the execution of the said instrument. Although he has interpreted the words "constituted by" to mean "created by", he did not go to the length of saying that "creation" means, giving birth to a completely new partnership which did not exist before the incorporation of its terms in a written document.

80. He has answered the question, framed in the reference, thus: "That the registration of the partnership firm as evidenced by the partnership deed executed on the 10th of May 1957, for the account period from 1st April 1957 to 9th May 1957, was rightly refused by the Income‑tax Tribunal in terms of section 26‑A(1) of the Act, but it could not be so refused for the period from 10th May 1957 to 31st March 1958."

81. It is thus clear that Siddiky, J., has virtually answered the question referred to this Court in the negative. He has, however, agreed with the Tribunal with regard to the view it has taken in respect of the accounting year. The point of divergence between him and the learned Chief Justice is, therefore, narrowed down to the issue : What should be the accounting year?

82. It appears to me that the most important thing to remember is that the instrument as required by section 26‑A of the Act itself has no direct connection with the accounting period as claimed‑by the assessee in respect of the assessment. I fail to see what the accounting period has to do with the instrument constituting a firm under section 26‑A or with the con struction of the words "constituted under" or "constituted by" in that section.

83. The first case, to which reference has been made in both the judgments is, the case of R. C. Mitter & Sons v. Commissioner of Income‑tax, West Bengal which is a judgment of a Division Bench of the Calcutta High Court delivered by Chakravartti, C. J. (as he then was). The learned Chief Justice in the aforesaid case observed that the word "by" was inappropriate in the context in which it was used. He came to the conclusion that the words "constituted under" in fact meant "created by", that is, created by means of or by virtue of the terms of the document itself. The learned Chief Justice does not, however, totally preclude from registration under section 26‑A, a firm which had existed by oral agreement, and the terms of which were, on a later occasion incorporated by a deed. His decision turned on the question as to what would be the material time for the accounting year which the assessee has claimed in respect of the assessment. The opposite view was taken in the case of Dwarkadas Khetan & Co. v. Commissioner of Income‑tax, Bombay which is a decision of the Bombay High Court, pronounced by Chagla, C. J., in which it was held that there was no justification for substituting the preposition "by" in place of "under". He has held that there was no warrant for importing a word which was not in the section itself. The learned Chief Justice of the Bombay High Court has, inter alia, expressed himself in the following terms: "The section does not say . . . . . that the firm must not exist prior to the instrument of partnership being executed." Chakravartti, C. J., in R. C. Mitter & Sons' case also does not say so. Whereas Chagla, C. J., was of opinion that there was a difference in meaning between the words "constituted under" and the words "constituted by", he did not indicate what that difference was, presumably because he was not called upon to do. Both these cases along with some other cases came to be con sidered by the Supreme Court of India in the case of Messrs R. C. Mitter & Sons v. Commissioner of Income‑tax, West Bengal in which it was reiterated that the words "constituted under" did not mean the same thing as conveyed by the words "constituted by". The Supreme Court of India also did not express any view with regard to the question as to what was the difference in meaning between the two terms, but contented itself by saying that the words "constituted by" connoted "created by".

84. I am myself inclined to take the view that in the context of section 26‑A (1), the words "constituted by" mean the same thing as "created by". The question is: What does the phrases "created by" mean ? It seems that there has been no attempt to find the various shades of meaning connoted by those words, namely, "created" by since the Oxford English Dictionary has been quoted in various judgments mentioned above, I shall myself take recourse to that authority. In volume 2 of that Dictionary the word "constituted", as has been noted in some cases, has been described, inter alia, as follows: "To give legal or official form or shape to (an assembly etc.)" In the same volume at page 1152 the following meaning, inter alia, has been given to the word "create": "To make, form, constitute, or being into legal existence (an institution, condition, action, mental product, or form, not existing before)." From what have been quoted above, it is evident that the words "constitute" and "create" are interchangeable terminologies. It is thus clear that, if legal shape and definition are given to an existing partnership firm by a document, the said partnership firm is "created" with reference to that said document, in the sense that a previously non‑existent documentary form has been given to such a firm, for the first time. Therefore, if a documentary form or shape is given to a firm which had existed by oral agreement, it will be correct to say that the said firm was created by the document, meaning thereby that a documentary form or shape was given, for the first time, to the said firm. Two decisions of the Court in England, one given in the case of the Queen v. The Registrar of Joint Stock Companies, Ex parte Johnstone ((1891) 2 Q B 598) and the other In re: Smith Davidson v. Myrtle ((1396) 2 C D 590), have been discussed both by Chakravartti, C. J., and Imam Hossain Chowdhury, C. J., in the judgments pronounced by them There the words "Company duly constituted by law" and "Company incorporated by Act of Parliament" have been interpreted to mean a company which was brought into existence by virtue of and in force of a special Act of Parliament or some special law to that effect. Even applying the said concept it will also be correct to say that a firm which has existed by virtue of an oral agreement, is constituted by or created by a special instrument which has given a documentary shape to such a firm.

85. The most pertinent question in this behalf is: Does the expression "partnership constituted by", conceding the same to mean "created by", mean a partnership which has come into existence, for the first time, by the said document? If a very narrow and strict construction is given to the aforesaid words, that result might be achieved. Mr. Mesbahuddin, appearing on behalf of the Commissioner of Income‑tax, has argued that the Legislature, by substituting the word "by" for the word "under", has intended to effect a change in the meaning of section 26‑A (1) as it stood prior to the amendment. It may be so, but he could not say, what was the alteration in the meaning of the provisions of subsection (1) of section 26‑A of the Act. I have already indicated that the words "partnership constituted by an instru ment", even in the sense of a partnership created by an instrument, in effect, mean, a partnership to which a documentary form has been given by means of an instrument. If the expression covers merely such partnership which are brought into existence, for the first time, by the deed it would have the result of eliminating a preponderance of partnership in this sub continent which usually have their origin by oral agreements, iii the first instance. I do not think that, by merely altering a preposition in section 26‑A (1), the Legislature intended to effect a drastic change and to render the provisions of that section almost illusory. If such a narrow meaning has to be given to that expression, it would have the effect of practically eliminating a preponderance of partnerships in this country, which usually comes into existence, in the first instance, informally by oral agreements. I may add that, even, in the large number of decisions that were cited before us, it has nowhere been suggested that the expression partnership "constituted by" a document or a partnership "created by" a document would preclude from regis tration all such partnership which had a prior existence by oral agreements, but with regard to which a subsequent document embodied their terms and conditions. Even Mr. Mesbahuddin disowned the argument that the purpose of the Legislature in effecting the aforesaid amendment was to render the benefit of the aforesaid section practically nugatory.

86. In my opinion, all that section 26‑A requires for the purpose of registration is, that the Income‑tax Officer will, on an application for registration, look into the document and its terms and conditions and see whether from the terms of the said document a partnership can be spelt out. He will further see that the particulars as required by the said section as well as the rules governing the same have been complied with. Thereupon it would be incumbent upon him to register the firm and he cannot refuse such registration. The accounting period will have to be computed, apart from section 26‑A, in accordance with section 23(5) and the other provisions of the Act, read along with the rules framed thereunder.

87. I do not think that section 26‑A would rule out from its purview such partnership which had a prior existence by oral agreement, but the terms and conditions of which have been subsequently incorporated in documents.

88. In the two judgments pronounced by Imam Hossain Chowdhury, C. J. and Siddiky, J., the common features are as follows: (a) Both have taken the view that a partnership, which had existed by oral agreement, but of which the terms and condi tions were incorporated in a subsequent document is entitled to registration under section 26‑A. Siddiky, J., is of opinion that such partnership cannot claim registration with `retros pective effect.' (b) Neither of them has taken the view that such a partner ship, as mentioned above, cannot claim registration. (c) Siddiky, J., has observed: "The Appellate Tribunal has expressed itself saying that the partnership came into existence on the 10th May 1957, and sought to be registered for the accounting year 1957‑58, that is, from 1st April 1957 to 31st March 1958, and, therefore, it was not co‑extensive with the account period and as such could not be registered. "I have my doubts on this point, because I do not find any provision in the Income‑tax Act which bars the coming into exist ence of a partnership firm in the middle of or at any time in a particular accounting period. Suppose this particular document of the 10th May 1957, would not have had the clause (4) in it, which reads, that partnership shall commence from the 1st April 1957, could the Income‑tax Authority refuse to register this firm with effect from 10th May 1957, if it would have fulfilled all other conditions of sec tion 26‑A (1) and the rules framed thereunder for taxation purpose for the accounting period 1957‑58? I think not." If I may say so, with respect, the aforesaid view seems to point to the crux of the matter. The logical consequence of the aforesaid observations would be that the Tribunal misdirected itself in refusing registration to the assessee firm. The addition of a clause saying that the partnership had commenced business earlier only required a factual investigation, whether it was so. So far as section 26‑A is concerned there is an end of the matter in respect of registration.

89. Having registered the partnership firm the said officer is to consider the provisions of section 23 (5) (a) which provides for certain benefits which a registered partnership firm can claim. Section 23 (5) (a) reads thus: "(5) Notwithstanding anything contained in the foregoing subsections, when the assessee is a firm and the total income of the firm has been assessed under subsection (1), subsection (3) or subsection (4), as the case may be,‑ "(a) in the case of a registered firm super‑tax (but not income‑tax) payable by the firm itself shall be determined and the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year, shall be assessed and the sum payable by him on the basis of such assessment shall also be determined . . . . ." The accounting year for the submission of income‑tax return would depend upon this section as well as other relevant provisions of the Income‑tax Act together with the rules framed thereunder with reference to the genuine existence of the firm itself.

90. It would be relevant to note, in this connection, the provisions of clause (b) of subsection (5) of section 23 of the Act, which are as follows: "(b) In the case of an unregistered firm the Income‑tax Officer may proceed in the manner laid down in clause (a) as applicable to a registered firm, if, in his opinion, the aggregate amount of the tax including super‑tax, if any, payable under such procedure would be greater than the aggregate amount which would be payable by the firm and the partnership individually if the firm were assessed as an unregistered firm."

91. It is clear from the above that a discretion has been left to the Income‑tax Officer to give such advantages to an unregistered firm as those to which a registered firm is entitled. This discretion obviously means a discretion which should be exercised on a proper consideration of matters relevant for that purpose and it does not mean an arbitrary discretion. It is thus patent that the question of the period. of accounting has no direct reference to registration, for which the provisions of section 26‑A and the rules framed thereunder are self- sufficient.

92. Imam Hossain Chowdhury, C. J., in pronouncing his judgment in this case, has taken the view that the words "constituted by" cannot be interpreted to mean "created by". I have sufficiently indicated above that, in my opinion, the better view appears to be that, so far as section 26‑A is concerned, those words mean one and the same thing. On a reference to the Oxford English Dictionary I have shown that, from this point of view, there is no difference between the words "constituted by" and the words "created by", whatever else might be the distinction between the expression "constituted under" and the term "constituted by". Apart from this, I am in respectful agreement with the views expressed by him in the judgment that he has pronounced. I need not, therefore, reiterate the same.

93. With regard to the principle of interpretation, Siddiky, J., has observed as follows: ". . As has been held by Viscount Simon, L. C., in the case of Nokes v. Doncaster Amalgamated Collieries Ltd. 1940 A C 1014 that the golden rule is that, the words of a statute must prima facie be given their ordinary meaning. Similarly, Lord Craworth, L. C., in the case of Mateson v. Hart (1854) 25 L J C P 108, observed as follows: `We ought to give the words their plain, literal and natural meaning where we do not see from its scope that such meaning would be inconsistent or would lead to manifold injustice'."

94. This principle is well‑settled. But the question is: Does not a document, which gives a shape to a pre‑existing partnership, create a partnership in a documentary form? The creation in this sense is a matter of form and shape. Therefore, the plain and natural meaning of the words, such as, a partnership created by a document, can and do mean a partnership to which the said document has given a shape and form. Chakravartti, C. J., in R. C. Mitter & Sons' case has observed thus: "If the instrument merely records the earlier origin of the partnership and the agreement then entered into and says in the usual phraseology that the parties desire that the terms of the agreement should be placed on record, no partnership is constituted by the deed even with respect to the period subse quent to execution. The deed in such a case is merely a deed of a declaratory character or a memorandum. If, however, in addition to recording the earlier origin of the firm in a verbal agreement and its subsequent history, the deed also states that the part ners shall carry on business in future in accordance with its terms, it can undoubtedly be construed and should, in my view, be construed as creating or originating a partnership for the future as from its date and only in such case can an in strument of such a composite character be made the basis of a claim to registration with respect to the subsequent period."

95. With very great respect, one fails to see what the distinction is which the learned Chief Justice was drawing between the two different situations indicated by him with reference to a restricted and narrow meaning given to the expression "constituted by an instrument". From the point of view of section 26‑A, there is no distinction between a document which sets out that it is merely incorporating the terms and conditions of a pre‑existing partnership and a document which incorporates such terms and conditions with the added rider that the firm will, in future, abide by the terms and conditions as incorporated in the said document. In both the cases the document has not, for the first time, brought into existence a partnership. In both the cases the respective documents are merely giving a form and shape to a pre‑existing firm. The mere recitation of a wish that it is going to abide by the terms and conditions embodied in the relevant document in future does not make any difference whatso ever from the point of view of the constitution of the firm itself. In case of both the documents, which have been referred to above, the result, would be the same. A document, which merely recites and incorporates all the terms and conditions of an existing partnership, also implies that the firm is going to be governed by the same terms and conditions, in future, until dissolution. The mere addition of a ‑ few words expressing an intention to be so bound by the terms of the document makes no difference whatsoever. Neither of the aforesaid documents has, in fact, brought into existence a new partnership. Both the documents have, in fact, merely incorporated the terms and con ditions of a pre‑existing partnership. In the first case the document expressly recites that it is so ; in the second case the document merely adds a rider that the parties bind themselves to such agreement in future. In any event, it is clear that, even according to Chakravartti, C. J., if a document incorporates the terms and conditions of a pre‑existing partnership and adds a rider that the partners would abide by them in future, such partnership would be entitled to registration under section 26‑A, although, strictly speaking, even under the aforesaid conditions, all that the said instrument is doing is that it is giving a docu mentary shape to an existing partnership.

96. Quite a large number of decisions have been cited at the Bar, and in none of the said decisions the view has been taken that, in the event of a document incorporating the terms and conditions of a pre‑existing partnership, such partnership cannot at all claim registration. The consistent view is, that, it can claim registration ; but the divergence of opinion seems to gyrate round the question : What should be the accounting period? I have already stated that section 26‑A is concerned with the registration of a partnership which can be traced from a document. The accounting period will have to be determined with reference to the factual existence of the firm, having regard to the various provisions of the Act.

97. Mr. Mesbahuddin has argued that, there is a distinction between the words "constituted under" and "constituted by". It is true that the two words have different significance under different contexts : but under certain circumstances, they mean one and the same thing. He has submitted that, a Court should not lose sight of the fact that the Legislature consciously amended the section and substituted "by" for "under". What then is the distinction between the two? In so far as the matters which call for our consideration in this case are concerned, there appears to be no distinction whatsoever. We can only speculate, as pointed out by Imam Rossain Chowdhury, C. J., as to what was the intention of the Legislature in so substituting the word "by" for "under". One difference, which suggests itself may be stated as follows: Suppose a document merely incorporated an agreement between three or more persons to form themselves into a partnership and the detailed terms and conditions of which, such as the shares of the partners etc., were left to be determined by oral agreement sometime after the execution of the document; if, thereafter, the parties orally agree in details as to what would be the respective obligations of the partners and the division of profits between the partners inter se, a full-fledged and complete partnership would be brought into existence. In such a case it would be correct to say that a partnership was "constituted under" the document ; but it would be inaccurate to say that it was "constituted by" it. The partnership, having regard to its terms and conditions, could not be traced or spelt out of the deed itself. It followed from the deed. But, it took final shape and form by an oral agreement. Such a partnership could not be registered under section 26‑A. The above is an instance of the distinction between the words "constituted under" and "con stituted by".

98. It seems that the insistence on an instrument is designed to eliminate laxity and to facilitate investigation to the genuineness of a firm, the existence of which is required to be shown by a document. To insist further that a firm should not have been in existence prior to the execution of a document would amount to extending the benefit of registration to only small fraction of firms in this country, and to deprive the generality of firms which, in accordance with usual practice in this behalf, are brought into being by oral agreements.

99. It will be remembered that, in R. C. Mitter & Sons' case, Chakravartti, C. J., has observed that the word "under" was inappropriate and that the proper proposition was "by". The Legislature might have substituted an appropriate preposition for an inappropriate one. However, one can only speculate on this point and I am not called upon, in this case, to answer the question posed by Mr. Mesbahuddin. He himself did not, and could not, give any answer to his own query.

100. The correct principles of construction, which would apply in this case, are as follows: (i) When words have various shades of meaning, that meaning should be given to them which will be in consonance with the rest of the section. (ii) The Legislature is not presumed to have effected a drastic change in the law by the mere alteration of a pre position, without any clear and more explicit indication to the effect that that was its intention. In Maxwell's Interpretation of Statutes, 9th Edition, page 291, while discussing the principle of construction with regard to statutes imposing burdens, it has been inter alia, stated as follows: "Statutes which impose pecuniary burdens, also are subject to the same strict rule of construction." To say that it is only when a partnership is created, for the first time, by a document, that registration can be claimed under the said section, would amount to depriving a substantial majority of partnerships in this country from the benefit of this section. This could not have been the intention of the Legislature as there is to clear and specific indication in the section itself to show that that was its intention. (iii) In interpreting section 26‑A of the Act, the language of subsection (1) must be read along with that of subsection (3) as well as the rest of the section. Subsection (3) requires the Income‑tax Officer to see whether a genuine firm is or was in existence, constituted "as shown in the instrument or instruments, of partnership executed in writing". The gist of the matter is, that the document must show the existence of the partnership. I have underlined the words "as shown in the instrument or instruments" in order to emphasise the basic concept that the Income‑tax Officer is merely required to see the existence of the firm as shown in the relevant instrument. He is not required to see that a previously non‑existent firm has been brought into existence, for the first time, simultaneously with the execution of the document. In this connection, all that the Income‑tax Officer is required to do is to look fairly and squa rely into the document and to see whether a firm, which is claimed to be in existence, is fully reflected in the document. If it does show that and if the Income‑tax Officer is satisfied that the firm is in genuine existence and that the partnership was in force in the relevant previous year, he must register the same. The word "may" in the said subsection means "must."

101. In the present case the Appellate Assistant Commis sioner seems to have come to a finding of fact that the partnership was in genuine existence from the date claimed by the assessee. The Appellate Tribunal has not taken a decision on an appraisal of the facts of the case; it has merely contented itself by observing as follows: "In that view of the matter, there was `technically' no genuine firm existing during the whole of the year under assess ment." I do not think that the Tribunal was justified in taking a technical view of the matter. The question before it was, not whether the partnership existed technically but whether, in fact, it did exist genuinely.

102. In the case of R. C. Mitter & Sons' v. Income‑tax Commissioner, West Bengal, Hidayatullah, J., in delivering his judgment in the Supreme Court, has observed thus: "I entertain, however, some doubt as to whether the instru ment sought to be registered should be in existence in the accounting year, before registration can be claimed. There is nothing in the Act which says this specifically. My brother has reasoned from the contents of the Act and the Rules that such a condition is implied. While I entertain some doubts, I am not prepared to record a dissent, more so as the Board of Revenue has issued instructions that all firms should be registered, whether the documents under which they were constituted existed in the accounting year or not, provided the Income‑tax Officer was satisfied about the genuineness of the firms."

103. I respectfully agree with the aforesaid observations, with this difference, that I myself entertain no doubt that section 26‑A does not say that the instrument itself upon which the firm is sought to be registered must be in existence in the accounting year, notwithstanding the substitution of "by" for "under" in subsection (1) of section 26‑A.

104. Having regard to the fact that the relevant document in this case is dated the 10th of May 1957, and that the appli cation made under section 26‑A of the Act for registration was made on the 30th of October 1957, and also considering the fact that the assessment year is 1958‑59, the question referred to us in this reference constitutes two questions which have been rolled into one. The first question is : Is the refusal to register the said firm under section 26‑A in accordance with the law?

105. I will answer this question in the negative, that is, the registration has been wrongly refused. I may add that the period of limitation, namely, six months, would run from the date of the constitution of the firm by the aforesaid instrument and not from the actual constitution of the firm. As I read the judgment of Siddiky, J:, the above answer is also in consonance with the view expressed by him in the said judgment.

106. The next question is : What should be the accounting year for which the firm can claim advantage of the benefit of registration under section 26‑A of the Act ?

107. I will answer this question by saying that, this will depend on a finding as to the factual existence of the firm on an appraisal of the evidence produced in the case. It is not the "technical" but the "genuine" existence of the firm which is the crucial question. In this connection, reference may also be made to the terms of section 23 (5) (b) and the Circular No. 8 of 1957, issued by the Central Board of Revenue. To the question, as framed in this reference, I will give an answer in the negative, namely, that registration of the assessee firm has been wrongly refused in this case, that is, it was not rightly refused. S. Q./K‑. B. A. Reference answered in the negative.