Valid gifts and genuine capital contributions are required for firm registration; a reference cannot be compelled on an unraised question.

A firm could not obtain registration under Section 26A because the alleged gifts to sons and employees were not valid transfers: the parties had no independent means, no cash or property actually passed, and book entries and an unregistered partnership deed were insufficient. In Burma, a gift by one Mahomedan to another had to satisfy Section 123 of the Transfer of Property Act, and the deed could not transfer immovable capital without registration. The instrument therefore did not establish genuine capital contributions or true shares. The court also held that it could not require the Commissioner to state a case under Section 66(3) where the specific question had not first been raised in the Section 66(2) application.

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Issues: (i) whether the alleged gifts to the sons and employees were valid so as to constitute contributions to the capital of the alleged partnership and support registration under Section 26A of the Income-tax Act; (ii) whether the Court could require the Commissioner of Income-tax to state a case under Section 66(3) of the Income-tax Act where the assessee had not asked the Commissioner to refer the same question under Section 66(2).

Issue (i): whether the alleged gifts to the sons and employees were valid so as to constitute contributions to the capital of the alleged partnership and support registration under Section 26A of the Income-tax Act

Analysis: The alleged partners had no independent means, no cash or property passed, and the only material relied on was book entries and a partnership deed. In Burma, a gift by one Mahomedan to another had to comply with Section 123 of the Transfer of Property Act. As no valid gifts were made, the supposed contributions to capital failed. The partnership deed also could not effect a transfer of the immovable capital because it was not registered under the Registration Act. The instrument therefore did not truly specify shares that were in fact held by the parties, and the statutory requirements for registration were not met.

Conclusion: The alleged firm was not entitled to registration under Section 26A of the Income-tax Act.

Issue (ii): whether the Court could require the Commissioner of Income-tax to state a case under Section 66(3) of the Income-tax Act where the assessee had not asked the Commissioner to refer the same question under Section 66(2)

Analysis: The question framed by the assessee had not been raised in the application under Section 66(2). The Court treated the point as already governed by authority and held that, in the absence of a proper request to the Commissioner on that question, it could not compel a reference under Section 66(3).

Conclusion: The Court lacked jurisdiction to require the Commissioner to state a case on that question.

Final Conclusion: The application for a reference failed, and the assessee obtained no relief; the Commissioner was not compelled to state a case and the order stood against the assessee.

Ratio Decidendi: A court cannot compel a case to be stated under the reference provisions unless the specific question sought to be raised was first asked to be referred in the statutory application, and registration of a firm under Section 26A requires genuine compliance with the statutory requirements for valid shares and contributions.

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