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Issues:
1. Entitlement to registration of a firm under section 184(1)(ii) of the Income-tax Act, 1961 based on the specified individual shares of the partners in the partnership deed. Analysis: The judgment by the High Court of Bombay addressed the issue of whether a firm of chartered accountants was entitled to registration under section 184(1)(ii) of the Income-tax Act, 1961 for the assessment year 1969-70. The dispute arose from a partnership deed that specified fixed sums for junior partners, leading to the Income-tax Officer initially denying registration to the firm. However, the Appellate Assistant Commissioner and the Tribunal subsequently ruled in favor of the firm's registration, prompting the Revenue to challenge the decision. The crux of the matter revolved around the interpretation of section 184(1)(ii), which mandates that the individual shares of partners must be specified in the partnership instrument for registration. The Revenue contended that the fixed sums allocated to junior partners, as per clause 14 of the partnership deed, did not constitute specified shares in the profits or losses of the firm. The argument centered on whether the term "shares" should be construed as stated proportions rather than fixed amounts. In analyzing the legal precedent and relevant provisions, the court highlighted the essential elements of a partnership, emphasizing the need for an agreement specifying the partners' share in profits. Reference was made to a judgment by the Andhra Pradesh High Court, which underscored the importance of considering the real relationship between partners in determining the existence of a partnership. However, the court found that this authority did not align with the present case's circumstances. Drawing on a historical case involving partnership agreements, the court cited the observations of Amberson Marten C. J., who opined that partners could agree to share profits in various ways, including fixed sums in lieu of variable profits. The court emphasized that partners could structure their profit-sharing arrangements as long as they adhered to the partnership agreement. Ultimately, the court relied on the principles outlined in the Contract Act and the precedent set by the Bombay High Court in previous cases to reject the Revenue's argument. The court concluded that the fixed sums designated for junior partners in the partnership deed constituted their specified shares in the profits, dismissing the Revenue's challenge and ruling in favor of the firm's entitlement to registration under section 184(1)(ii) of the Income-tax Act, 1961. The judgment did not award costs, bringing a resolution to the dispute regarding the firm's registration status for the relevant assessment year.
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