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TMI Blog1981 (12) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as barred by limitation. 4. On merits also he concluded the firm was not entitled to registration. 5. The reasons which weighted with the ITO for holding that the firm was not entitled to registration on merits are: The partnership sought to be registered was one constituted on 1st April, 1975 be taking over the business in manners carried on earlier by Chalapathi Rao in his individual capacity under the name and style of M/s Jaya General Stores. Enquires showed that Subba Rao the other partner of the firm was born only on 28th September, 1957 and therefore he was a minor in 1st April 1975. Since in law there can be no partnership between one adult and a minor the ITO stated that no registration could be given since there was no valid firm. In this regard he pointed out that when this defect was brought to the notice of the assessee for the asst yr 1976-77 on 18th January, 1979 a letter was filed with drawing the claim for registration for that year and further stating that for the asst yr. 1976-77 the entire income could be assessed in the hand of Chalapathi Rao. He emphasised that the constitution of the firm being ab initio void though on the date of execution of the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his controlling the business as the managing partner. Subba Rao being unaware of the profits could not according to the AAC show that he was a dummy partner. Eventually the AAC directed grant of registration. 11. The revenue is in appeal. The Deptl. Rep submitted that it was amply clear that though the deed of partnership was executed only on 21st February, 1976 the firm came into existence from 1st April, 1975 and on that date Subba Rao was a minor and therefore the partnership was illegal. He took us through the deed and stated that there was a mention of the assets and liabilities of earlier firm which was in existence on 1st April, 1975 were taken over at values as on 31st March, 1975 and all these showed that the firm came into existence on 1st April, 1975 even according to the deed of partnership and on the said date Subba Rao was a minor. The ld. counsel for the assess on the other hand submitted that the instrument of partnership nowhere mentioned that the firm came into existence from 1st April, 1975. It only spoke of assets being taken over according to the value as on that date and where was no specific mention that the firm came into existence from a date anterior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a minor. In this regard it was pointed out that though minor not entitled to become a partner he had signed the partnership deed on 21st Feb, 1976 after attaining majority. The assumption of the ITO that the firm came into existence from 1st April, 1975 was not controverted. there is another letter dt. 19th February, 1979 from Chalapathi Rao addressed to the ITO in connection with certain notices issued to show-cause way penalty should not be imposed where in he stated that there was a shortage of the second partner on 1st April, 1975 hence registration sought could not be granted. As we have already mentioned the instrument of partnership itself made reference to taking over of asset and liabilities on 1st April, 1975 we have therefore come to the conclusion that according to the instrument of partnership dated 21st February, 1976 and executed on that date the fact sought to be set out was that the firm of Chalapathi Rao and Subba Rao came into existence on 1st April, 1975. On the date admittedly Subba Rao was a minor, but on 21st February, 1976 admittedly when the deed was executed Subba Rao had attained majority. The ld. Dept. Rep. would seek to submit that during the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mity as far as the accounting period 1st April, 1976 to 31st March, 1977 now under consideration is concerned. A reference was also made by the ld. Deptl. Rep. to the decision of the Supreme court in N.T. Patel Co. vs. CIT (1961)42 ITR 224 (SC) That was also a case where the deed of rectification was executed after the close of the accounting period. The court held that since instrument of partnership which was in existence in the accounting period suffered from an infirmity which has rectified only later registration could not be granted. The ratio of that case also iis not applicable here because there was an instrument of partnership which did not in our view suffer from any legal infirmity executed on 21st Feb, 1976 which was in existence for the full accounting period 1st April, 1976 to 31 march 1977. Yet another case on which the ld. Deptl Rep. relied on was the decision of Karnataka High court in CIT vs. Jagadish Jakati Co (1979) 8 CTR (kar) 40: (1979) 119 ITR 19 (kar). The ratio in that decision also does not help the Revenue because one of the persons shown as a partner therein was admittedly a minor on the date on which the deed had been executed which is not the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. Once he has been working in the firm his statement that he does not remember when he joined the shop and as to how long he was working in the firm losses significance. As far as the profits are concerned it will be that he might not remember. Since there is no specific question put in about his being partner we cannot come to the conclusion that any material was elicited which would militate against Subba Rao having entered into the deed of partnership with father. The ld Deptl. Rep. had sought to urge that Subba Rao should be construed as the benaimdar of the father. we have already given our reasons for concluding that Subba Rao was working in the firm. There is nothing to show that the share profits of Subba Rao went to his father and therefore we cannot accept the contention the Subba Rao was a benamider of his father. We cannot also agree that material was brought on record to show that the principles of agency were lacking in the present case because as we have already stated no specific question was put to Subba Rao when he was examined about the partnership aspect we would therefore uphold the order of the AAC and dismiss the appeal of the Revenue. - - TaxTMI - TMITa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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