1981 (2) TMI 77 - HC - Income Tax

Summary

Issues Involved:
1. Refusal of registration due to lack of a fresh deed of partnership.
2. Delay in filing the application for registration.
3. Validity of multiple documents constituting an instrument of partnership.
4. Interpretation of the term "instrument of partnership" under the I.T. Act, 1961.
5. Requirement of stamping for the letter dated December 2, 1969.

Issue-wise Detailed Analysis:

1. Refusal of registration due to lack of a fresh deed of partnership:
The Income Tax Officer (ITO) refused registration on the grounds that no fresh deed of partnership was executed and there was a multiplicity of documents. The Appellate Assistant Commissioner (AAC) held that the assessee's plea that there was no necessity for executing a fresh deed was sustainable. The Tribunal agreed with the AAC, referencing the decisions in Haridas Premji [1930] 4 ITC 475 [FB] and other cases, concluding that multiple documents could be treated as a deed of partnership for registration purposes. The Tribunal viewed the letter dated December 2, 1969, as a fresh deed of partnership.

2. Delay in filing the application for registration:
The ITO also refused registration because the application was filed beyond the end of the accounting year without a valid explanation. The AAC condoned the delay, accepting the assessee's bona fide belief that no application was initially necessary. The Tribunal upheld this decision, agreeing that the delay was justifiably condoned.

3. Validity of multiple documents constituting an instrument of partnership:
The Tribunal, referencing the decisions in A. Phiroj and Co. [1966] 59 ITR 645 and Chhotalal Devchand [1958] 34 ITR 351, held that multiple documents could constitute an instrument of partnership. The Tribunal concluded that the correspondence between GEC and Philips in December 1969 served as a fresh deed of partnership.

4. Interpretation of the term "instrument of partnership" under the I.T. Act, 1961:
The Tribunal noted that under the old Act, a firm had to be constituted under an instrument of partnership, whereas under the new Act, it had to be evidenced by an instrument of partnership. The Tribunal agreed with the AAC that the letter dated December 2, 1969, served as a fresh deed of partnership, satisfying the requirement of an instrument of partnership.

5. Requirement of stamping for the letter dated December 2, 1969:
Mr. Bagchi argued that the letter dated December 2, 1969, should not be considered as it was not properly stamped. However, the court observed that the rigorous provisions of the Evidence Act are not binding on the ITO and that a document not properly stamped can be admitted in evidence once impounded. The court referenced Section 36 of the Indian Stamp Act, 1899, and the Supreme Court decision in Javer Chand v. Pukhraj Surana, AIR 1961 SC 1655, to support this view. The court concluded that the letter dated December 2, 1969, should not be excluded from consideration.

Conclusion:
The court concluded that the Tribunal was justified in affirming the AAC's order. It held that the term "instrument" does not mean only a regular partnership deed but can include any formal transfer, and multiple documents or correspondence can constitute an "instrument of partnership." The question was answered in the affirmative, in favor of the assessee, with no order as to costs.