1983 (10) TMI 154 - AT - Income Tax

Summary

Issues Involved:
1. Correct age of partner Parasmal at the time of executing the partnership deed.
2. Genuineness of the partnership firm and its entitlement to registration.
3. Admission of minors Ramanlal and Prakash to the benefits of partnership.
4. Allegation of Prakash being a benamidar of Parasmal.

Detailed Analysis:

Issue 1: Correct Age of Partner Parasmal
The primary contention revolves around whether Parasmal was a minor or a major at the time of the partnership deed dated 10th November 1969. The revenue argued that the School Leaving Certificate indicating Parasmal's birth date as 29th March 1952 should be considered conclusive, making him a minor on the relevant date. However, the AAC accepted alternative evidence, including affidavits from Parasmal's father and an astrologer, and a medical certificate, which suggested that Parasmal was born on 29th September 1951. The Tribunal upheld the AAC's findings, noting that the School Leaving Certificate, while strong evidence, was rebuttable. They concluded that Parasmal's correct date of birth was 29th September 1951, making him a major at the time of the partnership deed.

Issue 2: Genuineness of the Partnership Firm and Its Entitlement to Registration
The revenue challenged the genuineness of the partnership firm on several grounds, including the alleged incorrect age of Parasmal and the admission of minors as full-fledged partners. The AAC, supported by the Tribunal, found the partnership deed valid and genuine, emphasizing that the minors were admitted only for the benefits of the partnership. The Tribunal agreed with the AAC's directive to continue the firm's registration under the Income Tax Act.

Issue 3: Admission of Minors Ramanlal and Prakash to the Benefits of Partnership
The revenue argued that the partnership deed did not explicitly state that minors Ramanlal and Prakash were admitted only for the benefits of the partnership, suggesting they were full-fledged partners. The Tribunal, however, interpreted the partnership deed as a whole, particularly Clause No. 9, which excluded minors from sharing losses, thus confirming their admission was only for the benefits of the partnership. The Tribunal upheld the AAC's view that the minors were not full-fledged partners.

Issue 4: Allegation of Prakash Being a Benamidar of Parasmal
The ITO considered minor Prakash as a benamidar of Parasmal based on Parasmal's inclusion of Prakash's share of profit in his personal income return. The AAC accepted the explanation that this inclusion was an oversight, corrected by a revised return. The Tribunal found no evidence of a benami transaction and upheld the AAC's conclusion that Prakash was not a benamidar of Parasmal.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the AAC's findings on all grounds. The partnership deed was deemed valid, the minors were admitted only for benefits, and the correct date of birth for Parasmal was established as 29th September 1951, making him a major at the time of the partnership formation. Consequently, the firm was entitled to registration under the Income Tax Act.