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1. Entitlement to registration under section 26A of the Income-tax Act based on the application dated April 4, 1958. Detailed Analysis: The judgment involves a reference made by the Tribunal to the High Court regarding the entitlement of a firm to registration under section 26A of the Income-tax Act based on an application dated April 4, 1958. The case revolved around a partnership between two brothers, Madanlal and Chhaganlal, who entered into a partnership agreement concerning a business dealing in silver and gold ornaments. The partnership terms included the entitlement of each partner to interest on their capital investment. The partnership was duly registered with the Registrar of Firms, and an application for registration under section 26A was submitted on April 4, 1958, stating the profit-sharing ratio after deducting interest on capital advances. However, when the profits were calculated, interest was not credited, leading to the rejection of the application by the Income-tax Officer and the Appellate Assistant Commissioner. The Tribunal, on appeal, took a different view, stating that the application declaration only pertained to the profit-sharing ratio, and since the profits were divided as per the partnership deed, registration should be granted. The High Court analyzed Rule 4 of the Income-tax Act, which outlines the procedure for registration. The rule mandates that the Income-tax Officer must be satisfied that the firm exists as per the partnership instrument and that the application is properly made. The court emphasized that the application was correctly made, and the firm's existence was not in question as per the partnership deed. The High Court highlighted that the failure to credit interest on capital investments during profit division should not be a ground for refusal of registration. The crucial factor for registration denial should be the non-existence of the firm as per the partnership instrument, not minor deviations in following partnership terms. The court concluded that the firm was entitled to registration under section 26A based on the application dated April 4, 1958. The reference was answered in favor of the firm, and the department was directed to bear all costs associated with the reference.
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