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TMI Blog1982 (12) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... s for upholding the order of the Commissioner (Appeals) directing continuation of registration. Similar is the plea in C.O. No. 76 (Coch.) of 1982. Of the latter two cross-objections, the first cross-objection relates to the assessment year 1980-81 and the second to the assessment year 1981-82. 2. We briefly set out certain facts which would enable a decision being rendered so far as the appeals relating to the registration aspect is concerned. 3. For the assessment year 1980-81, the ITO considered that the application in Form No. 12 was filed out of time. But the Commissioner (Appeals) held that the application was not belated and this issue is no longer in controversy. 4. As far as the merits are concerned, the ITO referred to the relevant portion of clause 14 of the partnership deed executed on 1-11-1973 which read as under : " The profits after charging all expenses including interest on borrowings, partners' salaries and expenses, shall be shared by the partners in proportion to the amount of capital contribution by them. " He then adverted to the clause relating to the contribution of capital which was clause 5 in the deed and the particulars of capital contribution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was a firm of nine partners. He referred to the facts which we have set out already. He also referred to a decision of the Supreme Court in the case of Mandyala Govindu Co. v. CIT [1976] 102 ITR 1, but eventually decided the issue in favour of the assessee by stating that once registration was granted, continuation of registration cannot be refused as long as the requirements of filing a valid declaration under section 184(7) of the Act, are satisfied. 8. The revenue is aggrieved and with reference to its appeal the learned departmental representative submitted that the Kerala High Court had repeatedly held that there must be an instrument of partnership specifying the shares in both profits and losses and as long as such an instrument was absent in the accounting period, continuation of registration could not be given. He placed reliance on the decision of the Kerala High Court in the case of Best Automobiles which referred to earlier decisions on the point. 9. The learned counsel for the assessee in reply relied on the provisions of section 184(7) and stated that so long as the requirements were complied with by the filing of a valid declaration, registration ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Rules, in ascertaining whether the application is in conformity with the Act and the Rules, the partnership deed has to be construed in a reasonable manner and the deed read as a whole and in the context of the relevant circumstances of the case. If reading the partnership deed in a reasonable manner indicates that the shares both in profits and in losses can be inferred from the deed, registration cannot be refused. The trend of judicial pronouncements is that the claim for registration should not be refused unless there is ambiguity or uncertainty about the shares of the partners either in the profits or the losses of the business. 3. These instructions should please be brought to the notice of all the officers. Departmental appeals which are pending before the Tribunal or High Courts may also be reviewed in the light of the legal position as explained above. " Therefore, he submitted that continuation of registration should not have been refused. 11. We have considered the rival submissions. We would first examine the aspect from the angle of grant of registration. In the case of Parekh Wadilal Jivanbhai the relevant clause in the partnership deed regarding apportio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown to be the shares in losses in the Schedule to the said application. The Supreme Court in the case of Mandyala Govindu Co. had observed as under : ". . In this case the shares of the partners are not equal. In the absence of any indication to the contrary, where the partners have agreed to share the profits in certain proportions, the presumption is that the losses are also to be shared in like proportions. Jessel M.R. states the principle in In Re. Albion Life Assurance Society as follows : 'It is said, as a general proposition of law, that in ordinary mercantile partnerships where there is a community of profits in a definite proportion, the fair inference is that the losses are to be shared in the same proportion.' " Therefore, it would appear that on the basis of the construction of a partnership deed it could be construed that the shares in losses would be the same as the shares in profits. The Supreme Court, however, in the aforesaid case had referred to the cleavage of opinion between the Mysore and Allahabad High Courts, on one side, and the Gujarat and Kerala High Courts, on the other, where the Kerala High Court had taken the view that the shares had to be sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m at all in the eye of law. Where there is no firm at all in the eye of law it cannot be said that it is a firm constituted under an instrument of partnership. Section 184(7) reads as under : " (7) Where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year : Provided that--- (i) there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted ; and (ii) the firm furnishes, before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the return of income for such subsequent assessment year, a declaration to that effect, in the prescribed form and verified in the prescribed manner, so, however, that where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the time so allowed, he may allow the firm to furnish the declaration at any time before the assessment is made. " What the ITO has to see before registration is continued, is whether th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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