1993 (9) TMI 71 - HC - Income Tax

Summary

Issues: Granting registration to a firm for the assessment year 1977-78.

The judgment delivered by the High Court of Rajasthan pertained to a case where the Income-tax Appellate Tribunal had referred a question of law regarding the granting of registration to a firm for the assessment year 1977-78. The firm in question consisted of four partners, and a new partner, Shri Nirmal Kumar, was taken in place of a deceased partner. The Income-tax Officer initially denied registration to the firm as profits were not divided in accordance with the new partnership deed. The Appellate Assistant Commissioner upheld this decision, stating that Shri Nirmal Kumar was not a partner as the new partnership deed was not given effect to. However, the Income-tax Appellate Tribunal overturned the decision, noting that the profits were ultimately credited to Shri Nirmal Kumar's account after an inadvertent mistake by the accountant. The Tribunal found the firm entitled to registration for the assessment year 1977-78 based on these grounds.

Upon considering the matter, the High Court found that the genuineness of the firm was not in question, and the issue arose due to the failure to allocate profits to Shri Nirmal Kumar as per the new partnership deed. The Court noted that registration for the subsequent assessment year had been granted based on a sale deed. The Court agreed with the Tribunal's findings that the profits meant for Shri Nirmal Kumar were mistakenly credited to the deceased partner's account, but had since been rectified by transferring and merging the accounts. Consequently, the Court held that the Tribunal's decision to grant registration to the firm for the assessment year 1977-78 was legally sound and upheld the same.