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Issues:
1. Refusal of registration to the assessee firm under section 186(1) of the IT Act. 2. Interpretation of partnership deed clauses and profit distribution following a partner's death. 3. Application of the Hindu Succession Act in profit distribution among heirs. 4. Genuine partnership determination based on profit sharing ratio and distribution. 5. Legal implications of profit distribution in subsequent years and its impact on firm's genuineness. 6. Comparison with relevant case law and its applicability to the current case. Analysis: 1. The appeal before the Appellate Tribunal ITAT CALCUTTA concerned the refusal of registration to the assessee firm under section 186(1) of the IT Act, challenged by the assessee against the order of the AAC. The dispute arose following the death of a partner and subsequent changes in the partnership structure, leading to the denial of registration by the ITO. 2. The primary contention revolved around the interpretation of the partnership deed clauses and the subsequent profit distribution after the demise of a partner. The ITO raised concerns regarding the distribution of profits not aligning with the stipulated ratios in the partnership deed, raising doubts about the genuineness of the partnership. 3. The application of the Hindu Succession Act in the context of profit distribution among heirs was pivotal in determining the validity of the partnership and the subsequent registration. The ITO's cancellation of registration was influenced by the perceived non-compliance with the statutory requirements of profit distribution among the deceased partner's heirs. 4. The determination of a genuine partnership hinged on the assessment of profit sharing ratios and the actual distribution of profits among the partners. The ITO's decision to cancel registration was based on the belief that the profit distribution did not adhere to the partnership deed's specified ratios, casting doubt on the authenticity of the partnership. 5. The Tribunal's analysis delved into the legal implications of profit distribution in subsequent years and its impact on the firm's genuineness. Emphasizing that profit distribution could occur in subsequent years without affecting the partnership's validity, the Tribunal scrutinized the actual receipt of profits by the partners to ascertain the genuineness of the firm. 6. Drawing comparisons with relevant case law, particularly the judgment of the Allahabad High Court, the Tribunal differentiated the present case from precedents where profit distribution discrepancies led to registration denials. By highlighting the factual distinctions and legal precedents favoring the assessee, the Tribunal ultimately overturned the AAC's decision and directed the registration to be granted to the firm, allowing the appeal.
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