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Issues Involved:
1. Registration of the assessee-firm under section 26A of the Income-tax Act, 1922 for the assessment year 1959-60. 2. Impact of the death of a partner on the firm's registration and continuity. 3. Interpretation of clause 12 of the partnership deed. 4. Compliance with the requirements for renewal of registration under section 26A and the Income-tax Rules, 1922. Issue-wise Detailed Analysis: 1. Registration of the Assessee-Firm under Section 26A The primary issue was whether the assessee-firm, constituted under the partnership deed dated April 25, 1955, was entitled to registration for the assessment year 1959-60. The deed included nine partners, each with an equal share in profits and losses. After one partner, Laxminarayan, died on January 26, 1958, a new deed was executed on December 1, 1958, including his widow, Godavaribai, as a partner. The application for renewal of registration was filed on June 29, 1959, but was initially refused by the Income-tax Officer due to unspecified shares of the legal heirs of the deceased partner. 2. Impact of the Death of a Partner on the Firm's Registration and Continuity Clause 12 of the partnership deed stated that the firm would not dissolve upon the death of any partner. Instead, the surviving partners would continue the firm, and the heirs of the deceased partner would be entitled to the deceased's share of profits until the end of the accounting year. The Income-tax Officer argued that the heirs did not become partners but were merely entitled to a share in profits, leading to the rejection of the renewal application. The Appellate Assistant Commissioner reversed this decision, interpreting that the partnership continued until the end of the accounting period. 3. Interpretation of Clause 12 of the Partnership Deed Clause 12 was pivotal in determining the firm's continuity and the rights of the heirs. The court held that this clause constituted a contract to the contrary within the meaning of sections 37 and 42 of the Partnership Act, meaning the firm would not dissolve upon a partner's death. The surviving partners would continue the firm, and the heirs would receive the deceased's share of profits until the end of the accounting year. The court clarified that the heirs were not liable for any losses incurred during this period, which would be borne by the surviving partners. 4. Compliance with the Requirements for Renewal of Registration The court examined whether the application for renewal met the conditions under section 26A and the Income-tax Rules. The requirements included that the firm be constituted under an instrument of partnership specifying individual shares, and that the application be made in the prescribed form. The court found that the original deed, which included provisions for the death of a partner, remained unaltered. Thus, the firm's constitution and individual shares as specified in the instrument of partnership had not changed. The application for renewal, signed by the surviving partners and the widow of the deceased partner, complied with all prescribed requirements. Conclusion: The court concluded that the assessee-firm met all the conditions for renewal of registration under section 26A. The original partnership deed's provisions allowed for the firm's continuity and specified the handling of profits and losses upon a partner's death. The application for renewal was correctly filed, and the Income-tax Officer was obligated to grant the renewal of registration. The question referred to the court was answered in the affirmative, and the revenue was directed to pay the costs of the assessee-firm.
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