1986 (8) TMI 94 - AT - Income Tax

Summary

Issues:
- Granting of registration to the assessee firm under s. 185(1)(a) of the IT Act, 1961
- Creation and validity of Nidhi Kedia Trust and Sanjiv Kedia Trust
- Consideration of provisions of the Explanation to s. 185(1)
- Appointment of trustees in the Trust Deeds
- Examination of facts in the order of the ITO under s. 185(1)(b)
- Genuine existence of the firm and entitlement to registration

Analysis:

The judgment concerns three appeals by the Revenue for the assessment years 1977-78, 1978-79, and 1979-80, all involving the grant of registration to the assessee firm under s. 185(1)(a) of the IT Act, 1961. The Revenue contended that the ACC erred in allowing registration, raising issues related to the creation and genuineness of Nidhi Kedia Trust and Sanjiv Kedia Trust. The Revenue highlighted discrepancies in the trust deeds, including dates and beneficiaries, questioning the validity of the partnerships formed with these trusts.

The Departmental Representative argued that the trusts were created after the partnership deed, emphasizing that the alleged partners representing the trusts were not genuine partners at the time of the partnership deed's execution. Additionally, the provisions of the Explanation to s. 185 were not adequately considered by the ACC, and discrepancies in the trust deeds raised doubts about their authenticity and timing of creation.

On the other hand, the assessee's representative defended the ACC's detailed order, asserting that all aspects were considered, leading to the conclusion that the firm was genuine and eligible for registration. However, upon review, it was found that the trust deeds were executed after the partnership deed, raising concerns about the authenticity of the partners representing the trusts at the time of the partnership's formation.

The Tribunal observed that the ACC failed to adequately address the issues raised, particularly regarding the applicability of the Explanation to s. 185(1) and the timing of trust creation vis-a-vis the partnership deed. The Tribunal noted that the ACC's order lacked a thorough analysis of these critical aspects, leading to the decision to set aside the orders and require a fresh consideration of the relevant facts and issues.

Ultimately, the appeals of the Department were treated as allowed, emphasizing the need for a more comprehensive assessment of the issues raised concerning the genuineness of the firm and its entitlement to registration under the IT Act.