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Cancellation of registration granted to the assessee-firm under section 185 of the Income-tax Act. Analysis: The appeal was against the cancellation of registration granted to the assessee-firm under section 185 of the Income-tax Act. The original firm, engaged in poultry farming and agriculture, was re-constituted with partners including one acting as a promoter of a proposed company. The Income-tax Appellate Tribunal (ITAT) considered the contention that the representative capacity of a partner was irrelevant for determining the genuineness of the firm, citing the Supreme Court precedent in CIT v. Bagyalakshmi & Co. The ITAT noted that the partner in question was a promoter of a proposed company, and the Company Law recognizes a promoter's capacity to enter into partnerships and other agreements in anticipation of incorporation. The ITAT relied on legal precedents, including a Karnataka High Court decision and a Bombay High Court decision, to establish that a partner representing another person and acting in dual capacities does not affect the validity of a partnership deed. The ITAT found that the company had ratified the actions of the partner after its incorporation, confirming the genuineness of the firm and granting registration. The ITAT rejected the revenue's argument that the firm was not genuine due to the non-existence of the company at the time of partnership constitution. The ITAT emphasized that the partner's status as a promoter of a proposed company was sufficient evidence of his representative capacity, with no further proof required. The ITAT highlighted that the company's ratification of the partner's actions, even those predating its incorporation, validated the partnership. By considering the legal principles and precedents, the ITAT concluded that the firm was genuine and entitled to registration, overturning the lower authorities' decisions. Consequently, the ITAT allowed the appeal, directing the registration of the assessee-firm.
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