1985 (9) TMI 83

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....law a partnership had come into existence and whether it was entitled to registration ? " The facts leading to the present reference, briefly stated, are as under: The concerned assessment year is 1973-74. The firm was constituted to carry on business under the name and style of Messrs Achalsinhji Keshrisinhji and Company. It consists of five partners including one Smt. Manjulaben. The said firm applied to the Income-tax Officer for registration for the said assessment year. The Income-tax Officer refused registration holding that the partnership evidenced by the deed was not a genuine one. He came to that conclusion on the ground that Smt. Manjulaben had not contributed the amount that had been stipulated in the partnership deed as h....

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....further relying on clauses 7 and 9 of the partnership deed, came to the conclusion that as Smt. Manjulaben was taken as partner only for the reason that she was to contribute Rs. 5,000 as her share of the capital of the firm and for no other reason and that she has failed to make a contribution and for none else, it was held that the agreement by which she was to be admitted falls to the ground as not supported by consideration and, accordingly, the appeal was dismissed. Mr. J. P. Shah, the learned advocate for the assessee, submits that all the authorities below have erred in holding that non-contribution of the capital by Smt. Manjulaben is to be treated as a failure of consideration and, therefore, she was not a partner and, as a resu....

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....an agreement between persons for sharing the profits of a business and that the business should be carried on by all or any of them acting for all, that is, the element of mutual agency. It is also true that " partnership " presupposes an agreement that as required under section 10 of the Indian Contract Act, all agreements are contracts if they are made by free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and which are not expressly declared to be void by the parties. Therefore, the lawful consideration is the important ingredient for making an agreement a contract. " Consideration " has been defined in section 2(d) of the Contract Act as under : " When, at the desire of the promisor....

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.... extent of Rs. 5,000. There was also clause 8 for interest to be paid to the partners on the amount of capital invested at the rate of 6 per cent. Clause 9 provided that all the work in connection with the partnership was to be carried on by all partners in co-operation with each other. As the fourth partner, Smt. Manjulaben, was taken into partnership on her investing the capital and as she was to remain a dormant partner, she will have no responsibility relating to the work of the partnership. The other clauses are not material. For the purpose of finding out as to whether there was lawful consideration for the agreement of Manjulaben joining the partnership, one has to read clause 7. It clearly provides that she had given a promise to in....

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.... In that view of the matter, when the promise is given by Smt. Manjulaben for investing the amount of Rs. 5,000, that itself is consideration for the agreement. The Tribunal has, therefore, erred in observing that : " If, therefore, she does not make an investment, the agreement by which she is to be admitted falls to the ground as not supported by consideration. In other words, without the investment, she is not to be partner in the firm... " It may be stated that the Tribunal has though rightly observed that : "The contract must, thus, be founded on a valid consideration in the form of contribution of money or property towards capital or work and skill for common benefit or stipulation to share liability that might be incurred....