9911796707
TMI Blog1982 (6) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... profits 1. Raj Singh Sadana 3 per cent 2. Binod Kumar Barjatya 17 per cent 3. Aswinder Singh Sadana 16 per cent 4. Kamal Kumar Barjatya 16 per cent 5. Brijender Kaur Sadana 16 per cent 6. Smt. Enna Sadana 16 per cent 7. Smt. Santi Devi Barjatya 16 per cent 3. Clause 1 of this partnership deed 'superseded' the partnership deed dated 31-5-1975, and as per clause 2, it was provided that "all the terms and conditions of this deed shall be deemed to have come into operation from 1-1-1976,......". Clause 7 provided that the net profit and loss of the firm will be determined from year to year in the usual commercial manner and as per clause 8, it was provided that the accounting year of the firm shall be English calendar year. 4. On 24-5-1976, the aforesaid seven partners agreed to admit one more partner, viz., Smt. Maina Devi Barjatya, and, accordingly, a fresh deed of partnership was entered into on that date. In the preamble of the said deed of partnership, it was mentioned that the partnership deed dated 28-1-1976, was governing the aforesaid firm hitherto and that same had been registered with the Sub-Registrar at Gauhati on 14-5-1976, and that 'now it has been further deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the firm as requested could not be granted. The ITO further pointed out that it was not a case where a partnership business was carried on on a verbal agreement and deed was executed later on embodying the terms of the verbal agreement, a giving effect from a date on which the partners united to carry on business of the partnership. The ITO referred to the provisions of section 4 of the Partnership Act and emphasised that the partnership was the relation between the partners who had agreed to share the profits of a business carried on by all or any of them acting for all and inasmuch as, in the present case, the agreement between the eight partners to carry on the business to share the profit had been arrived at on 24-5-1976 only, the firm of eight partners could come into existence from that date onwards only and effect could not be given to that agreement in respect of the period when it did not exist. Under section 184, pointed out by the ITO, the registration could be granted to a firm only if it was evidenced by a partnership deed and that what has be to registered is the partnership firm evidenced by such partnership deed and, therefore, if it could be shown that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties agreed to unite. It is not open to the partners to extend the life of the partnership by saying that they will be considered to have carried on a business as from a date then past." It is urged by the learned departmental representative that the first finding of the learned Commissioner (Appeals) that the retrospectivity which had been given to the partnership deed dated 24-5-1976 was not repugnant to the Partnership Act was erroneous and against the interpretation of law as made by their Lordships of the Hon'ble Calcutta High Court. As regards the second finding of the learned Commissioner (Appeals), the learned departmental representative points out that while considering it, he has clearly forgotten that the assessee did not claim change in the constitution of the partnership firm in terms of sub-section (2) of section 187 and did not spell out in its application for registration that different constitution existed during the previous year under consideration and that registration be granted to the firm as constituted at the time of the assessment. Both Form Nos. 11 and 11A filed by the assessee disclosed only one constitution of the firm, viz., that of eight partne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of partnership. Admittedly, during the period 1-1-1976 to 27-1-1976, there were only five partners. The two partners, who were admitted to the partnership firm by the deed dated 28-1-1976 could not have been bound by the actions of the five partners done prior to that date. Besides, the contractual relationship between the five partners, which subsisted during 1-1-1976 to 27-1-1976, could not have been washed away by the agreement dated 28-1-1976. Similar will be the position with regard to the agreement dated 24-5-1976. The eighth partner who was admitted to the partnership by the said deed could not have been foisted with any liability of the firm incurred prior to her becoming a partner for she could not have constituted any one of the other seven partners as her agent when she was not in agreement with them during the period 1-1-1976 to 23-5-1976. The power to deem a putative situation as real has been conferred by jurisprudence on the sovereign only. No individual can deem a putative situation to be real and thereby alter the legal relationship between himself and the others which might have come into being as a result of his transactions in the meanwhile. The Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is noteworthy that the assessee's application in Form No. 11A is not in accordance with the reality inasmuch as it does not indicate the various changes in the constitution of the firm during the previous year. It has been made on the basis as if there has been only one constitution during the entire previous year. The ITO, therefore, was not, in our opinion, justified in not accepting this assertion of the assessee and not granting registration to the assessee-firm on the basis of Form No. 11A filed by it. 14. This brings us to the alternative argument of the assessee, viz., that if there was a defect in the form of the assessee, it was the duty of the ITO to have pointed out the said defect to the assessee in terms of sub-section (2) of section 185 and inasmuch as the ITO did not do so, he erred, and that, therefore, the ITO should be directed to comply with the provisions of law now. Sub-section (2) of section 185 reads as follows : "(2) Where the Income-tax Officer considers that the application for registration is not in order, he shall intimate the defect to the firm and give it an opportunity to rectify the defect in the application within a period of one month from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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