1991 (11) TMI 118 - AT - Income Tax

Summary

Issues Involved:
1. Continuation of registration of the assessee-firm for assessment years 1982-83, 1983-84, and 1984-85.
2. Impact of a minor partner attaining majority on the partnership deed.
3. Requirement of a new partnership deed upon a minor partner attaining majority.
4. Filing and acceptance of Form No. 12 for continuation of registration.

Issue-wise Detailed Analysis:

1. Continuation of Registration of the Assessee-Firm:
The primary issue was whether the assessee-firm was entitled to the continuation of registration for the assessment years 1982-83, 1983-84, and 1984-85. The Income-tax Officer (ITO) initially refused the continuation of registration for 1982-83, arguing that the partnership deed dated 18-10-1979 did not specify how profits and losses should be divided if a minor partner attained majority. The assessee contended that execution of a new partnership deed was unnecessary and that the firm had only profits in the relevant assessment years, making the loss-sharing ratio irrelevant. The Commissioner of Income-tax (Appeals) [CIT(A)] accepted the assessee's contention and directed the ITO to grant continuation of registration.

2. Impact of a Minor Partner Attaining Majority:
The ITO argued that upon the minor partner M. Sudershan attaining majority, there should be a change in the profit and loss sharing ratio, which was not addressed in the original partnership deed. The assessee contended that under section 30(7) of the Indian Partnership Act, the minor partner's share in profits and losses remains unchanged unless explicitly altered by a new agreement. The Tribunal agreed with the assessee, noting that Form No. 12, signed by all partners, indicated no change in the profit and loss sharing ratio, thus negating the need for a new partnership deed.

3. Requirement of a New Partnership Deed:
The ITO insisted that a new partnership deed was necessary when a minor partner attains majority. However, the CIT(A) and the Tribunal relied on various judicial precedents and CBDT Circulars to conclude that a new deed is not mandatory if the profit and loss sharing ratios remain unchanged. The Tribunal cited the Full Bench decision of the Kerala High Court in CIT v. Phair Laboratories and the CBDT Circulars, which clarified that no fresh deed is required if the minor partner does not undertake to bear any part of the losses upon attaining majority.

4. Filing and Acceptance of Form No. 12:
For the assessment year 1984-85, the ITO refused continuation of registration, claiming the assessee failed to prove timely submission of Form No. 12. The assessee provided a Certificate of Posting dated 31-7-1984 as evidence. The Tribunal referred to the CBDT Circular dated 26-6-1965, which instructed that a declaration under section 184(7) should not be rejected merely on technical grounds and should be returned for rectification if found defective. The Tribunal concluded that the ITO's outright rejection was unjustified, and the CIT(A)'s direction to grant continuation of registration was upheld.

Conclusion:
The Tribunal dismissed the departmental appeals, affirming the CIT(A)'s orders to grant continuation of registration for the assessment years 1982-83, 1983-84, and 1984-85. The Tribunal emphasized that the execution of a new partnership deed was unnecessary if the profit and loss sharing ratios remained unchanged and that procedural lapses in filing Form No. 12 should not result in outright rejection without allowing rectification.