HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
M/s Progressive Financers v. The Commissioner of Income Tax, Madras
Civil Appeal No. 1568 (NT) of 1981 (caption); three appeals expressly identified in the judicial body, two companion appeal numbers not printed
[1997] 2 SCR 280 ·
184 (historical registration) · 185 (historical registration reference)
Sources & disclosures includedDownload original judgment / order
Two-judge bench · S.C. Agrawal, J. · G.T. Nanavati, J.
Assessment years: 1968-69, 1969-70, 1970-71
01 · Facts of the case
The firm was formed by a 1 July 1967 deed with four adults and a minor admitted to the benefits of partnership. Of Rs 5 lakh capital, the adults contributed 25%, 12.5%, 12.5% and 12.5%, and the minor 37.5%; net profits followed capital proportions. The ITO regarded the minor as a full partner and the contract as void, relying on several deed clauses and the lack of an express loss-sharing clause. Registration and continuation were refused and assessments made as an association of persons (physical pages 4–6).
The first appellate authority and Tribunal upheld the firm’s claim, but the High Court answered three references against it. The Supreme Court’s operative years are AY 1968-69 for registration and AYs 1969-70 and 1970-71 for continuation. An earlier recital calls the initial application one for AY 1967-68; that conflict is retained rather than substituted for the referred question and final relief (physical pages 4, 6–7 and 11).
Source: See the proposition-specific paragraph and PDF-page references below.
02 · Discussion by the Hon’ble Court
Statutory registration conditions required compliance, but did not justify mechanically disregarding a reasonably ascertainable allocation. Reading Kylasa Sarabhaiah, Mandyala Govindu and Parekh Wadilal, the Court required construction of the deed as a whole with relevant circumstances, including the prescribed application particulars. Mandyala Govindu did not establish that every absence of express loss percentages was fatal; on its facts the allocation remained unascertainable (physical pages 7–9).
Here the minor was admitted only to benefits and bore no losses. The adult partners’ proportional capital/profit interests supplied the loss-sharing implication, and the actual registration schedule confirmed it: the 25% profit participant bore 40% of losses and each 12.5% profit participant bore 20%. The schedule was consistent with the deed and legal principles, not a conflicting subsequent reconstruction. The ITO had overlooked it because he treated the agreement as void (physical pages 9–11).
Source: See the proposition-specific paragraph and PDF-page references below.
03 · Judicial decision
The three appeals were allowed and the High Court judgments and orders set aside. The referred questions were answered by holding the firm entitled to registration for AY 1968-69 and renewal/continuation for AYs 1969-70 and 1970-71. Each party was to bear its own costs (physical page 11).
Source: See the proposition-specific paragraph and PDF-page references below.
04 · Outcome / in whose favour
In whose favour: Assessee
Three appeals allowed; registration and continuation upheld for the operative three years; parties bear own costs
Final statutory-registration determination on the reasonably ascertainable shares and consistent application schedule
No permission for a minor to be made a full partner, no rule ignoring unascertainable losses or inconsistencies, and no current filing-regime certification.
Source: See the proposition-specific paragraph and PDF-page references below.
05 · AKHB REVIEW POINT
Read the complete deed, the minor’s status and the application schedule together. The usable principle is reasonable ascertainability, not dispensing with statutory particulars. Explain the adult-only loss allocation and whether the application genuinely confirms the instrument; do not turn a consistent schedule in this case into a licence to cure any defective or contradictory agreement.
The old registration regime was replaced by the Finance Act, 1992 from 1 April 1993. The bounded 2011 compilation check, pages 780–781, does not certify present-law requirements or this judgment’s later judicial treatment. The Court’s reliance on 1922 Act authorities is comparative reasoning; the present appeals themselves concern sections 184/185 of the 1961 Act.
Source: See the proposition-specific paragraph and PDF-page references below.
Proposition-specific source paragraphs and PDF pages
- topic
- Identity, deed, operative years and three appeals
- source url
- Open cited source
- pdf pages
- 1; 4; 6; 7
- paragraphs
- Unnumbered judicial text
- source role
- reported metadata and judicial text
- topic
- ITO objections, appellate history and reference questions
- source url
- Open cited source
- pdf pages
- 5; 6
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
- topic
- Reasonable construction and distinguishing Mandyala Govindu
- source url
- Open cited source
- pdf pages
- 7; 8; 9
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
- topic
- Actual schedule, adult loss shares and final relief
- source url
- Open cited source
- pdf pages
- 9; 10; 11
- paragraphs
- Unnumbered judicial text
- source role
- judicial text
- topic
- Historical registration regime replaced
- source url
- Open cited source
- pdf pages
- 780; 781
- paragraphs
- Section 184 and editorial amendment notes 90/96
- source role
- bounded statutory compilation and editorial note
Judicial authorship and separate opinions
G.T. Nanavati, J.Act identified in the reviewed source
Income-tax Act, 1961Scope of the Income-tax Act issue
- substantive 1961 act
- true
- not 1922 only
- true
- basis
- The present questions and relief concern the expressly identified 1961 Act provisions; references to the 1922 Act are historical statutory/precedent discussion, not the sole basis of this note.
Source & verification
Download original judgment / order · Open cited source rendition
Identified source rendition: 11 PDF pages; SHA-256 d341fb88577b586bb1e2a5da78fb84bf6acc2d6b119e63fc4918a48d483c3172. Original bytes preserved. Complete unnumbered judicial text physical pages 4–11/SCR 283–290. Three appeals expressly stated on pages 4 and 7; only one Supreme Court number printed. Editorial material ends on page 4; no adjacent judgment.
- The caption prints only Civil Appeal 1568 (NT)/1981, while the judicial body twice expressly identifies three appeals. The missing companion Supreme Court numbers are not invented.; The initial application recital gives AY 1967-68, but the first reference question and operative relief specify AY 1968-69. The note follows the operative years and preserves the inconsistency.; Four adult partners and one minor beneficiary are distinguished; the source’s loose phrase “five partners” does not make the minor a full contractual partner.; The table and narrative are read together: adult loss shares are 40%, 20%, 20%, 20%; the minor has no loss share.; The headnote incorrectly describes a High Court appeal and misstates certain reported-citation volumes; judicial reference history controls this note.
Statutory scope
No automatic mapping to the Income-tax Act, 2025 or present-law certification. Apply the statutory text for the relevant year.
Later treatment
Source checked 2026-10-04. Comprehensive subsequent judicial treatment has not been verified. Only the expressly identified bounded historical statutory-compilation comparison was checked. No automatic current-law or Income-tax Act, 2025 mapping is certified.
Page references identify the supplied PDF; paragraph references identify the judgment unless stated otherwise.
Identified source links
- reported judgment — PDF 11 pages
SHA-256: d341fb88577b586bb1e2a5da78fb84bf6acc2d6b119e63fc4918a48d483c3172
- bounded historical statutory compilation — PDF 1251 pages
SHA-256: 1ec6e4c38dc1d524d1d40b1fd35d13ac1336c8fc549cef2af1bf723a999c822b
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