1973 PLP 250 (PTD)

MUSHTAQ HUSSAIN, J.‑--Messrs Lahore Central Iron & Hardware Machinery Merchants, a firm registered under the Partnership Act, was floated in year 1949 having been constituted by virtue of a deed of partnership executed on 14‑1‑1949. The firm made an application under section 26‑A of the Income‑tax Act for registration in respect of the charge year 1949‑

50. The application was rejected by the Income‑tax Officer because‑ "the deed of partnership dice not provide allocation of partners' shares in profits as required under section 26‑A of the Act."

2. The assessee filed an appeal against this order and the Appellate Assistant Commissioner, by his order, accepted the appeal and granted registration to the firm. This order became final as the Department did not agitate against it before any higher Tribunal or Court.

3. When the Income‑tax Officer, C‑Ward, Lahore, initiated proceedings for assessment for the year 1961‑62, the assessee as usual applied for renewal of the registration on the prescribed form and in the prescribed manner. This application of the assessee was rejected by the Income‑tax Officer on 4‑8‑1962, and renewal of registration was refused on the ground that‑ "The partnership deed on the basis of which renewal of registration has been sought is defective and dogs not specify the shares of the partners in profit or loss. I, therefore, refuse to renew registration." In so doing the learned Income tax Officer relied upon a decision of the Bombay High Court in the case of Parekh Wadilal Jiwanbhai (1962 P T D 221), wherein it was held that the individual shares of the partners in the firm should be expressly and definitely mentioned before registration can be granted.

4. The assessee filed an appeal and lost. He then filed a second appeal before the Income‑tax Appellate Tribunal, Lahore, which was allowed by order dated 22nd October 1964, on the ground that‑ "the assessing officer fn the case of our appellant rather went far beyond his powers and took upon himself a task which was in fact needed only at the time of registration."

5. The Commissioner of Income‑tax applied under section 66(1) praying to the Tribunal to refer the question to the High Court. The Tribunal has consequently referred the follow ing question to us for our opinion:‑ "Whether on the facts and in the circumstances' of the case, the Tribunal was right in holding that the Partnership Deed dated 14‑1‑1949 created a valid partnership within the meaning of section 26‑A of the Income‑tax Act?"

6. Section 26‑A of the Income‑tax Act as it was in force at the relevant time read as follows:‑ "26‑A.‑(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. The objection taken in the present case is that the individual shares of the partners have not been "specified" in the partnership deed. Paragraph '5 of the partnership deed provides that "5. the partners would make investments in equal shares in the partnership business." There is no other reference to this point in the agreement. There is, however, paragraph '7' which provides that‑ "7. the provisions of the Partnership Act, 1932 shall apply to all matters which have not been specifically provided for in this Deed." There is no doubt that section 13(b) of the Partnership Act, 1932 provides‑ "

13. Subject to contract between the partners (b) the partners are entitled to share equally in the profits earned, shall contribute equally to the losses sustained by the firm. Since paragraph 7, provides that the Partnership Act shall be applicable to all matters which have not been specifically provided, there could be no manner of doubt that by operation of law the shares of the partners in the profits and their liability for the losses is equal. The question that now falls for determination is whether this could be construed as "specifying the individual shares of the partners". 'Specify' has been defined in Black's Illustrated Law Dictionary as "to mention, specifically ; to state in full and A explicit terms ; to point out ; to state precisely or in detail ; to particularise; or to distinguish by words one thing from another. By virtue of the reference to the Partnership Act and the provisions of section 13(b) reproduced above, it can hardly be denied that the shares of the partners are determined from the partnership deed "in full and explicit terms" and "have been stated precisely" in it. The expression "specifically described" fell for interpretation before the Queen's Bench Division in Carpenter v. Deen ((1889) 23 Q B D 566.), and the following observation occur:‑‑ "Then we come to the other more important question namely, what is the meaning of the 4th section of the Bills of Sale Act (1878) Amendment Act, 1882? It is a precise and particular clause; it says this: Every bill of Bald shall have annexed thereto or written thereon a schedule containing an inventory of the personal chattels comprised in the bill of sale; and such bill of sale, save as hereinafter mentioned, shall have effect only in respect of the personal chattels specifically described. It is to be observed that the statute requires that the enumeration of the chattels shall not be in the body of the instrument, but in the schedule ; and that that schedule shall contain an inventory. That inventory is to contain a specific description of the chattels. In considering what is the meaning of the words 'specifically described' I do not think we have any occasion to enter into a discussion of the meaning of the word 'specifically'. It seems to me that we should look at the scope and object of the section. They are, in my opinion plain. I think they are to facilitate the identification of the articles enumerated in the schedule with those that are to be found in the possession of the grantor; that is to say, to render the identification as easy as possible and to render any dispute as to the intention of the parties as rare as possible, and to shut the door to fraud and controversy, which almost always arise when general descriptions are used. That is to be done as far as possible ; by which I mean, so far as is reasonably possible so far as a careful man of business, trying to carry the object of the Act into execution, could and would do without going into unreasonable particulars. That is what the Act requires. The meaning of the Act is that you must take reasonable care in the description of the subject‑matter in the Schedule." Similarly the expression "refers specifically" was interpreted by the Chancery Division in Acheson v. Russell ((1950) Ch. D 67) as follows :‑- "The question is whether the devise in the testator's will refers specifically (within the meaning of the section) to the property of which the testator was tenant to tail in possession at his death? 'The property must, I think, for this purpose be, pct the Manor Farm but two undivided third shares in the Manor Farm Can it be said that those two undivided shares are 'specifically referred to'? The argument for a negative answer to that question points out that the first‑mentioned 'one‑third' is obviously the one‑third in which the testator's interest was absolute‑I agree with that‑and that the 'other estate and interest' is not quantified, and therefore not 'specified' or specifically referred to. It was admitted, however, that if it had been quantified incorrectly e.g., by being called nine‑fifteenths instead of tea‑fifteenths‑the case might have been treated as one of a false demonstration. In my judgment, however, the reference is in fact specific. The testator refers to his `other estate and interest': and note that the words are in the singular, not in the plural. Id certum est quod certum reddi potest; and it is a matter of no difficulty to render certain the 'other estate and interest' of the testator in the property. I am not sure that the reference to the family property itself might not be sufficient, for the object of the section, and of the form in which it is cast, must surely be to avoid any risk of a disentail being effected by inadvertance or involuntarily. A specific reference need not, in my judgment, be a completely accurate and detailed description. Indeed, there is little difference between reference and allusion, what the testator is, in effect, saying is 'I own one‑third of the property, and I have also another estate and another interest in it; I am now disposing of the entirety'. The other view, that the reference is not specific, seems to pay too little regard not only to the expressed intention of the testator, but also to the probable intention of the Act, and to be of too technical a nature to commend itself to me." And the scope of the expression "specified person" was thus described in McHorran v. A. E. Harrison (Contractors) Ltd. ((1944) All E R 448):‑-- "First then: was this plaintiff a specified person? Article 8(4), which I have read, provides that: Every entry in the Schedule and every such notice as aforesaid shall specify . . . . ‑ (b) the persons employed by persons so specified or any class or description of such persons to whom this part of this order is to apply. It is argued for the defendants that the plaintiff was not a 'specified person' at all in this case, because he was not mentioned by name in the notice which notified to the employer the scheduling of the suit. What the notice did, in fact, was first of all to announce that amongst other sites the Townsend Lane Site, that is, the Brent Site. had been scheduled. Then it went on in the list below: (a) the persons carrying on undertakings in the scheduled works on the scheduled sites, (b) the class or description of persons employed by those persons in those works on that site to whom the orders are to apply J and then below there is appended the list referred to. This list sets out the persons referred to in (a) and (b) which I have just read. First of all, It specifies the persons carrying on the undertaking, and it goes on in this way:‑ All persons employed from time to time by persons carrying on undertakings, other than the excepted undertakings referred to above, except in the case of structural steel work erection . . . . and then follows certain classes of steel work apparatus erectors, helpers, and so on, What is argued is that before a person can be said to be `specified' the order requires the Minister to specify either the person or a class or description of persons; that specifying persons, as distinct from class or description, necessarily Imports giving their names; that specifying a class or descrip tion necessarily involves specifying a type of worker, such as 'all bricklayers' or 'all carpenters' and as the list in this notice does neither of those things precisely, there has been no valid specification and the order does not apply. I dissent from this argument. Persons can in my view, be specified without being named, provided they are unambiguously Identified, but, in any case, there was here, as I hold, valid specification of a class surely means no more than to designate a group of persons by reference to some common characteristic, which may be positive or negative. 'All barristers who have chambers in the Temple', is, in my view, a perfectly good specification of a class; so also is the phrase; 'Ail persons working in the Temple, except barristers' clerks.' This objection, therefore, in my view, fails."

7. To sum up, therefore, if something has been described "as far as is reasonably possible" or "as far as a careful man of business could and would do without going into the unreasonable particulars" and it need not "be a completely accurate and detailed description" and it can be "unambiguously identified" It would be said to have been "specified". This in fact is a specification by reference and this is nothing unusual. Even the Legislature enacts by reference. Referring to Lord Esher M. R. Craies in his book on Statute Law, Sixth Edition, at p. 223 quotes;‑ "If a subsequent Act bring Into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act just as if they had been actually‑ written in it with the pen, or printed in it, and the moment you have those clauses in the latter Act, you have no occasion to refer to the former Act at all. For all practical purposes, therefore, those sections of the Act of 1840 are to be dealt with as if they were actually in the Act of 1855." It would, therefore, follow as a corollary that the reference to the Partnership Act in paragraph '7' of the Partnership Agreement B would have the effect as if `it had been actually written in" the partnership deed "with the pen, or printed in it."

8. The Income‑tax Officer, therefore, was wrong when he came to the conclusion that renewal of registration could be refused because, according to him, the partnership dead did not comply with tire provision of section 26‑A in so far as it did not "specify" the individual shares of the partners. In fact an example of Legislation by reference is contained in proviso to section 26‑A (5) of the Income‑tax Act itself.

9. We were referred to Commissioner of Income‑tax v. Noor Hussain (P L D 1964 S C 657), and the observation at pages 667 and 668 that "In my opinion the above rule has really no application here. Section 26‑A confers a privilege on the assesses‑firm. It provides that the firm seeking benefit under section 23(5)(x) of the Act must conform to the provisions of section 26‑A of the Act . . . . . Therefore, no question of liberal interpretation of section 26‑A which merely provides procedure for registra tion of an assesses‑firm arises." Suffice it to say that we are not making any effort at giving section 26‑A a liberal interpretation. All that we are doing is interpreting the section as it exists according to the ordinary meaning of the words as used in the English language.

9. Let us also examine the question whether it was open to the Income‑tax Officer to have refused to renew registration of the firm at all. The defect which the learned Income‑tax Officer has found with the help of the decision of the Bombay High Court, in the partnership deed was present to the mind of the Income‑tax Officer who originally granted registration to the assesses as a firm. He was of the view that the registration could not be granted because of the so‑called defect. The assessee had filed an appeal against it and the Appellate Assistant Commissioner had rejected the view of the Income‑tax Officer C and granted registration on being satisfied that the terms of the partnership deed were such that it could not be said that the shares of the partners had not been `specified' in it. This decision of the Appellate Assistant Commissioner was accepted by the Department and was not challenged before the Tribunal. The Department would, therefore, be estopped from resiling from that position. It may be said that there is no estopped against statute but we are not advocating the contrary. All that we say is that the statute having to this very case been interpreted in a particular way and the interpretation not having been shall‑.aged and having been accepted by the Department, the Department was certainly bound by it particularly when no new circumstances had come to its notice.

10. In this connection we may take note of a ruling of the Supreme Court where their Lordships were dealing with the question whether the judgment of the Custodian in a particular case was judgment in rem and res judicata or not. Their Lordships found that, irrespective of the fact that it was a res judicata or not, the Custodian was bound by it unless it was a case of discovery of new facts.

11. So far as the case of Parekh Wadilal Jiwanbhai, is concerned, we need only say that the ratio of that case is based upon entirely different facts. Their Lordships observed that‑ "Now, in the instant case, it was incumbent on the Income tax Officer to duly scrutinise the partnership deed and see whether the requirements of section 26‑A, subsection (1) had been satisfied before granting registration of the firm. As we have already stated, on the scrutiny of the deed, the require ments do not appear to have been fulfilled. It, therefore, cannot be said that the registration of the firm made by the Income‑tax Officer in the years 1951‑52 and 1952‑53 was made by them after due scrutiny of the material on record. In these circumstances, in our view, there was no bar in the way of the Income‑tax authorities to refuse to renew the registration of the firm in the year 1953‑54." The facts of the present case are, however, quite different. Here the partnership deed had been duly scrutinised by the first Income‑tax Officer who had taken cognizance of the particular point on which Mr. Jalaludd in later refused the renewal of registration. Not only he took cognizance but he decided against the assessee and it was the Appellate Assistant Commis sioner who set the matter right by reversing the order of the Assistant Commissioner. As has already been stated, no appeal was filed against the order of the learned Appellate Assistant Commissioner. In this case, therefore, it cannot be said even by stretching imagination to the limits of credulity that the deed had not been properly scrutinised by the first Income‑tax Officer.

12. In these circumstances we answer the question in the affirmative with costs. K.B.A. Answer in affirmative.