1991 (1) TMI 63 - HC - Income Tax

Summary

Issues:
- Interpretation of rules 24 and 22(5) of the Income-tax Rules for continuation of registration under section 184(7) of the Income-tax Act, 1961.
- Validity of declaration in Form No. 12 filed by an assessee-firm for continuation of registration.
- Effect of a deceased partner's failure to sign the prescribed declaration on the continuation of registration.
- Consideration of partnership deed provisions in expelling a partner.
- Impact of a court order restraining a deceased partner from acting as a partner on the signing of the declaration.
- Requirement of existing partners to sign the declaration for continuation of registration.

Detailed Analysis:
The case involves a reference at the instance of the Revenue regarding the assessment year 1982-83. The main issue is whether the Tribunal was correct in holding that the assessee-firm was entitled to continuation of registration under section 184(7) of the Income-tax Act, 1961, based on a declaration in Form No. 12 filed on July 30, 1982. The firm had six partners, and the declaration was not signed by one partner, Lakshmidass Toolsidass. The Income-tax Officer initially granted continuation of registration, but the Commissioner of Income-tax set aside the order as he deemed the declaration defective. The Tribunal later directed the continuation of registration, which was challenged by the Revenue.

The crux of the matter lies in the interpretation of rules 24 and 22(5) of the Income-tax Rules. Rule 24 mandates that the declaration for continuation of registration shall be in Form No. 12 and signed by the partners as per rule 22(5). Rule 22(5) requires all partners to sign the application personally, except in specific circumstances. In this case, the deceased partner did not sign the declaration, raising questions about the validity of the continuation of registration.

The Tribunal found the firm genuine and that the requirements of the rules were met. The deceased partner, who did not sign the declaration, was expelled from the partnership as per the partnership deed due to misconduct. Additionally, a court order restrained the deceased partner from interfering in the firm's affairs. The court opined that the declaration must be signed by existing partners involved in the continuation of registration. Since the deceased partner was expelled and legally restrained from acting as a partner, his signature was not required.

The court emphasized that the conditions for continuation of registration were satisfied, as the existing partners signed the declaration. The court concluded in favor of the assessee, stating that the Tribunal's decision was correct. The judgment highlights the importance of adherence to partnership deed provisions, the impact of court orders on partner actions, and the necessity for existing partners to sign declarations for registration continuation.