1967 (7) TMI 25 - HC - Income Tax

Minor admitted to benefits of partnership attaining majority. Application for renewal of registration without fresh partnership deed - application for registration not maintainable

Summary

Issues:
1. Refusal of registration under section 26A of the Income-tax Act.
2. Validity of partnership deed and division of profits for registration.

Detailed Analysis:
1. The case involved a partnership firm constituted under a deed of partnership, with three partners, one of whom was a minor admitted to the benefits of partnership. The firm had been registered annually under section 26A until the assessment year 1958-59. However, for the assessment year 1959-60, the Income-tax Officer rejected the application for renewal of registration on the grounds that no fresh partnership deed was executed upon the minor attaining majority and that the profits of the business were not divided at the end of the previous year. The Appellate Assistant Commissioner allowed the appeal, but the Income-tax Appellate Tribunal dismissed the application for renewal of registration. The court held that the original partnership deed did not specify all three partners, rendering it insufficient for registration under section 26A, justifying the Income-tax Officer's decision to refuse registration.

2. The court also addressed the requirement for the division of profits for registration under section 26A. While the law governing partnerships may not mandate the division of profits at the end of each year, the income-tax law necessitates strict compliance with all requirements for registration. In this case, although the application for renewal stated that profits were divided, it was established that the profits of a specific business were not actually divided or credited between the partners. Consequently, the Income-tax Officer was deemed justified in refusing registration on this ground as well. The court affirmed the decision to refuse registration based on both grounds, emphasizing the importance of adhering to the income-tax law's requirements for registration.

In conclusion, the court answered the question referred to it in the affirmative, upholding the refusal of registration under section 26A of the Income-tax Act. The Commissioner of Income-tax was awarded costs, along with an assessment of the counsel's fee.