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Issues:
Whether the assessee-firm is entitled to registration under the Income-tax Act, 1961 based on the provisions of the partnership deed specifying the sharing of profits and losses among the partners. Detailed Analysis: The case involved a firm seeking registration under the Income-tax Act, 1961, for the assessment year 1969-70. The partnership deed in question admitted minors to the benefits of the partnership but did not specify the division of losses among the partners. The Income-tax Officer rejected the registration application on this ground, a decision upheld by the Appellate Assistant Commissioner. The assessee then appealed to the Income-tax Appellate Tribunal, which referred to the decision in Imdadali Tayabai v. CIT and held that the absence of a specific statement regarding sharing of losses did not disqualify the assessee from registration. However, the Supreme Court decision in Mandyala Govindu & Co. v. CIT was crucial in determining the outcome of the case. The Supreme Court emphasized the importance of specifying the sharing of losses in addition to profits for registration under the Income-tax Act. Subsequently, the Bombay High Court analyzed the partnership deed in question, focusing on clause 7 which outlined the liability of the partners and the minors admitted to the benefits of the partnership. The court noted that while the deed specified the sharing of profits, it did not clearly address the apportionment of losses among the partners. Drawing from the Supreme Court's decision, the court concluded that without a clear provision for sharing losses, the assessee could not be granted registration. The court also referenced decisions from other High Courts, such as the Madras High Court and the Andhra Pradesh High Court, which aligned with the interpretation of the Supreme Court regarding the necessity of specifying the division of losses in the partnership deed for registration purposes. Ultimately, based on the analysis of the partnership deed and the legal precedents, the Bombay High Court ruled against the assessee, stating that the absence of clarity on sharing losses meant the firm was not entitled to registration. The court answered the posed question in the negative, favoring the Revenue, and ordered the assessee to pay the costs of the reference.
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