1991 (2) TMI 16 - HC - Income Tax

Summary

Issues:
1. Registration of a firm under section 184 read with section 185 of the Income-tax Act, 1961 for the assessment year 1972-73.

Detailed Analysis:

The judgment pertains to the issue of whether a firm was entitled to be registered under section 184 read with section 185 of the Income-tax Act, 1961 for the assessment year 1972-73. The Income-tax Officer had refused registration to the firm, citing that the partnership deed did not specify the allocation of profit or loss among the partners. The Appellate Assistant Commissioner and the Tribunal upheld this decision. The firm argued that a deed of rectification was executed after the relevant accounting year, specifying the shares of the partners. The court referred to a similar case before the Supreme Court where it was held that the instrument of partnership must specify the individual shares of the partners during the relevant year. The court emphasized that registration confers a benefit on the partners, which can only be claimed if the requirements of the statute are strictly met. Despite the rectification deed, registration was still refused to the firm, following the precedent set by the Supreme Court.

Another case cited involved a firm that was granted registration despite not explicitly specifying individual shares in the partnership deed. The Supreme Court in that case considered the context and surrounding circumstances, such as equal profit sharing, to determine that the firm was entitled to registration. However, the court in the present case noted that the circumstances were different, and the partnership deed did not provide similar clarity on the allocation of shares among partners. The court highlighted the importance of adhering strictly to the statutory requirements for registration under section 184 of the Act.

Furthermore, a Division Bench of the court had previously rejected an application by the assessee under section 256(2), emphasizing that the deed of dissolution did not clearly specify the individual shares of the partners. The court noted that the deed lacked clarity on the allocation of shares, and surrounding circumstances could not imply such specification. Ultimately, the court answered the reference question in the affirmative and in favor of the Revenue, indicating that the firm was not entitled to registration under section 184 of the Income-tax Act, 1961 for the assessment year 1972-73. The judgment was concurred by both Judges Shyamal Kumar Sen and Ajit Kumar Sengupta.