Execution of a fresh deed of partnership. - Income Tax - 1161/CBDT

INSTRUCTION NO. 1161/CBDT Dated : April 4, 1978 Section(s) Referred: 185 ,184(7) Statute: Income - Tax Act, 1961 This has reference to the Boards instruction No.1082 dated 4-8-77 on the above subject. 2. It has been represented to the Board that the instructions in para 3 thereof are likely to be misunderstood so as to insist on the execution of a fresh deed of partnership specifying shares in losses of all the partners including the one who elected to become the partner on attaining majority during the relevant previous year, even though the original deed of the partnership stipulated the shares in losses of the adult partners and left no part of the loss undisturbed . The Board have been advised that there is no presumption under any provisions of the Partnership Act under which a minor electing to be a fulfledged partner on attaining majority would become liable to share in losses also. In case losses are borne in entirety by only some of the partners the partnership deed would still be a valid one. As per sec.4 of the same Act, the partners must agree to share profit and hence agreement to share losses is not essential. Thus sec.30(7)(b) read with sec.4 of the Act makes it clear that when a minor on attaining majority should share in losses also, then and only then a fresh deed of partnership effecting the change would be necessary. Therefore before the firm is allowed continuance of registration for the relevant assessment year, the ITO should satisfy himself on the basis of either an affidavit of the partner who attained majority or his statement on oath that he is not sharing in losses and that the shares in profits and losses as specified in the instrument of partnership admitting him to the benefits of the partnership earlier remained unchanged.