1977 (10) TMI 58 - AT - Income Tax

Summary

Issues:
Granting registration to the assessee based on a partnership deed with a discrepancy in the date of execution and one partner contributing capital while the other was a working partner without capital contribution.

Analysis:
The appeal was filed by the Revenue against the order of the AAC granting registration to the assessee based on a partnership deed executed on 17th June, 1972, where one partner contributed capital, and the other was a working partner without capital contribution. The ITO contended that the partnership was not genuine as one partner seemed to be a benamidar, and the deed had a discrepancy in the date of execution. The ITO refused registration, but the AAC reversed the decision, stating that the rectification of the date was valid, and a partnership could have one partner contributing capital and another as a working partner.

Upon review, the Tribunal found that the ITO's conclusion was based on presumptions without evidence of benami transaction elements. The Tribunal agreed with the AAC that the partnership was genuine, as the law allows for a combination where one partner contributes capital and the other provides labor. The Tribunal dismissed the Revenue's argument that the partnership was not genuine due to the discrepancy in the deed's execution date.

The Tribunal noted that the partners rectified the typographical error in the date of execution with a deed dated 8th Aug., 1975, with retrospective effect. The Tribunal emphasized that the rectification did not affect the partnership's genuineness or the commencement date of the business. Referring to relevant case law, the Tribunal distinguished cases where substantial alterations were made to partnership agreements, noting that in this case, the correction was a typographical error and could be rectified with retrospective effect.

In conclusion, the Tribunal upheld the AAC's decision, stating that there was no evidence to dispute the genuineness of the firm, and the rectification of the document with retrospective effect was valid. The Tribunal dismissed the Revenue's appeal, affirming the direction to grant registration to the assessee based on the corrected partnership deed.