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Issues:
- Registration of the firm for the assessment year 1957-58 under section 26A and the rules made thereunder. Analysis: The case involved a firm with eight partners, where the profits for the year ending March 31, 1957, were not divided among the partners but kept as a reserve due to financial difficulties. The firm applied for registration for the assessment year 1957-58, but the Income-tax Officer rejected the application citing reasons of delay and non-division of profits among partners. The Appellate Assistant Commissioner and the Appellate Tribunal also held that the application for registration was properly rejected due to the absence of division of profits among partners. The Tribunal referred the question of whether the registration of the firm is renewable for the assessment year 1957-58 to the High Court. The High Court observed that the requirement under rule 6 of the Income-tax Rules did not necessitate the immediate crediting of profits to each partner's account. The Court highlighted that the formality of profit division did not require the profits to be credited in the accounts of each partner, and the ownership in the profits ceasing to be joint sufficed. The Court emphasized that the partners' shares in the profit had been ascertained, even though credited to the reserve fund, and the absence of entries in individual accounts was merely a lack of arithmetical additions. The Court cited a previous judgment to support this interpretation. The Court rejected the argument that subsequent division of profits in the next year rendered the earlier application invalid, emphasizing that the application should be judged based on the facts at the time of application. The Court concluded that with the ascertainment of partners' shares in the profit, even if in the reserve fund, the requirement of profit division and crediting was met. Therefore, the Court directed the answer to the question of registration renewal for the assessment year 1957-58 to be affirmative, allowing the firm to be registered. The Court also awarded costs to the assessee.
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