1977 (6) TMI 4 - HC - Income Tax

Summary

Issues Involved:
1. Whether the Tribunal was right in holding that the release deed dated March 4, 1963, and the original partnership deed dated February 28, 1958, constituted an instrument of partnership evidencing the existence of partnership by the two continuing partners with their respective shares and in directing to grant registration to the firm on that basis.
2. Whether the Appellate Tribunal was justified in holding that there was compliance with Section 184(1) of the I.T. Act, 1961, for the assessment year 1963-64.
3. Whether, on the facts and circumstances of the case, the Tribunal was right in law in granting registration to the firm for the assessment year 1963-64.

Detailed Analysis:

Issue 1:
The Tribunal held that the release deed dated March 4, 1963, and the original partnership deed dated February 28, 1958, constituted an instrument of partnership evidencing the existence of partnership by the two continuing partners with their respective shares. The Tribunal confirmed that the partnership deed dated February 28, 1958, read along with the release deed dated March 4, 1963, evidenced the existence of the partnership by the two continuing partners with their respective shares. The Tribunal viewed that to hold otherwise would be a "technicality with a vengeance." However, the Court concluded that the partnership deed executed on January 1, 1964, could not be considered as it was outside the relevant accounting year. Therefore, the first question was answered in the negative and against the assessee.

Issue 2:
The Tribunal was justified in holding that there was compliance with Section 184(1) of the I.T. Act, 1961, for the assessment year 1963-64. The genuineness of the firm was not in dispute, and the profits were shared between the partners as per the documents dated February 28, 1958, and March 4, 1963. The Tribunal found that the firm had complied with the provisions of the Act and the Rules, making it eligible for registration. The application in Form No. 12 for the continuance of registration was valid as it was filed with the necessary declaration. The Court agreed with the Tribunal's view, answering the second question in the affirmative and in favor of the assessee, but only up to March 3, 1963.

Issue 3:
The Tribunal was right in law in granting registration to the firm for the assessment year 1963-64, but the registration could only be granted up to March 3, 1963. The Court noted that the firm was dissolved on March 3, 1963, due to the retirement of one partner, and a new partnership was created by the two continuing partners. Therefore, the registration under Form No. 12 was valid only up to the date of dissolution. The Court also referred to the provisions of Section 184 and Section 185 of the I.T. Act, 1961, and the relevant rules, concluding that the application in Form No. 11A filed after the relevant accounting year could not be considered. The third question was answered by stating that the Tribunal was correct in granting registration for the firm for the assessment year 1963-64, but only up to March 3, 1963.

Conclusion:
The Court concluded that the registration for the firm could only be granted up to March 3, 1963, for the assessment year 1963-64. The Tribunal's decision was partially upheld, and the firm could not be registered after that date for that year. There was no order as to costs.