1977 (1) TMI 52 - AT - Income Tax

Summary

Issues:
1. Registration application for assessment year 1973-74
2. Void in the loss sharing ratio

Analysis:

1. Registration Application for Assessment Year 1973-74:
The primary issue in this case revolved around the registration application for assessment year 1973-74. The Income Tax Officer initially refused registration for this year on the grounds that the application had not been furnished and there was a void in the loss sharing ratio. The assessee claimed to have submitted Form No.11 with the original deed on 12th April, 1972, but the authorities did not acknowledge it until January 1975. The Income Tax Officer requested evidence to support the application, leading to a series of correspondences and adjournments. Despite the lack of direct evidence, circumstantial evidence supported the assessee's claim. The Appellate Assistant Commissioner upheld the Income Tax Officer's decision, failing to consider the circumstantial evidence. However, the Appellate Tribunal found in favor of the assessee, concluding that the application was indeed furnished, supported by relevant circumstances and the conduct of the assessee.

2. Void in the Loss Sharing Ratio:
The second issue pertained to the loss sharing ratio specified in the partnership deed. The partnership deed outlined the distribution of profits and losses among the partners, including a provision regarding the liability of the minor partner. The departmental representative argued that the loss sharing ratio was not clearly defined, leading to a void. However, the Tribunal analyzed the clauses in the partnership deed and determined that the ratio was specified, with the two major partners bearing the full loss in a specific proportion. Contrary to the department's interpretation, the Tribunal found that the loss sharing ratio was adequately defined in the deed, favoring the assessee's position. As a result, the Tribunal allowed all three appeals of the assessee, directing the grant of registration for assessment year 1973-74 and the effect of registration for the subsequent assessment years 1974-75 and 1975-76.